Sterling v. Velsicol Chemical Corp.

• Decision Date: 20 October 1988
• Docket Number: No. 86-6087,86-6087
• Citation: 855 F.2d 1188
• Parties: , 55 USLW 2719, 11 Fed.R.Serv.3d 213, 18 Envtl. L. Rep. 20,978, 19 Envtl. L. Rep. 20,404, 26 Fed. R. Evid. Serv. 1037 Woodrow STERLING, et al., Plaintiffs-Appellees, v. VELSICOL CHEMICAL CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1188

855 F.2d 1188

27 ERC 1985, 55 USLW 2719, 11

Fed.R.Serv.3d 213,

18 Envtl. L. Rep. 20,978, 19 Envtl. L. Rep. 20,404,

26 Fed. R. Evid. Serv. 1037

Woodrow STERLING, et al., Plaintiffs-Appellees, v. VELSICOL CHEMICAL CORPORATION, Defendant-Appellant.

No. 86-6087.

United States Court of Appeals Sixth Circuit.

Argued Dec. 8, 1987.

Decided Aug. 29, 1988.

Rehearing and Rehearings En Banc Denied Oct. 20, 1988.

Sidney W. Spragins, Spragins and Murchison, Jackson, Tenn., James W. Gentry, Jr., Chattanooga, Tenn., Allen Kezsbom (argued), Linda R. Blumkin, Alan V. Goldman, Deborah P. Henkin, Fried, Frank, Harris, Shriver & Jacobson, New York City, for defendant-appellant.

James S. Wilder, III, Somerville, Tenn., Sidney Gilreath, Knoxville, Tenn., Anson M. Keller (argued), Bethesda, Md., for plaintiffs-appellees.

Before LIVELY, JONES, and GUY, Circuit Judges.

RALPH B. GUY, Jr., Circuit Judge, on rehearing.

A number of persons, including these plaintiffs, who either lived or owned property near defendant's landfill, brought a class action for personal injuries and property damage resulting from hazardous chemicals leaking from the landfill and contaminating the local water supply. The district court held the corporation liable upon legal theories of strict liability, common law negligence, trespass, and nuisance. The court awarded five representative members of the class compensatory damages for their personal injuries, as well as property damages, plus prejudgment interest on the entire award. The district court further held the corporation liable to the class as a whole for punitive damages.

Upon a review of the lengthy record in this difficult case, we find that the district court properly held Velsicol liable to the five representative plaintiffs but erred in the nature and amount of the damage awards. Accordingly, we affirm in part, reverse in part, and remand with directions for recalculation of some of the damages.

I. FACTS

In August, 1964, the defendant, Velsicol Chemical Corporation (Velsicol), acquired 242 acres of rural land in Hardeman County, Tennessee. The defendant used the site as a landfill for by-products from the production of chlorinated hydrocarbon pesticides at its Memphis, Tennessee, chemical manufacturing facility. Before Velsicol purchased the landfill site and commenced depositing any chemicals into the ground, it neither conducted hydrogeological studies to assess the soil composition underneath the site, the water flow direction, and the location of the local water aquifier, nor drilled a monitoring well to detect and record any ongoing contamination. From October, 1964, to June, 1973, the defendant deposited a total of 300,000 55-gallon steel drums containing ultrahazardous liquid chemical waste and hundreds of fiber board cartons containing ultrahazardous dry chemical waste in the landfill. ¹

Shortly after Velsicol began its disposal operations at the landfill site, local residents and county, state, and federal authorities became concerned about the environmental impact of the defendant's activities. As a result of this concern, the United States Geological Survey (USGS), in 1967 State authorities increasingly became concerned about the defendant's disposal of ultrahazardous chemicals at the site. ³ In 1972, the state filed an administrative action to close the landfill because the chlorinated hydrocarbons buried at the site allegedly were contaminating irreparably the subsurface waters. The state ordered Velsicol to cease disposal of all toxic chemicals by August 21, 1972, and all other chemicals by June 1, 1973.

                prepared the first of several reports on the potential contamination effects of the chemicals deposited into the landfill up to that time.  The 1967 report indicated that chlorinated hydrocarbons had migrated down into the subsoil and had contaminated portions of the surface and subsurface environment adjacent to the disposal site.  While the chemicals had not reached the local water aquifer, the USGS concluded that both the local and contiguous ground water were in danger of contamination. 2   Subsequent to publication of the 1967 USGS report, Velsicol expanded the size of the landfill disposal site from twenty to forty acres
                

In 1976, three years after the state permanently closed the landfill disposal site, the USGS, in conjunction with state authorities, commenced updating the 1967 USGS report. One major concern, which gave rise to the new USGS study, was the possibility of the chemicals migrating toward wells utilized by local residents. In 1978, the USGS issued a written report detailing the 1976 update of the 1967 report. The 1978 report found that the water table of the local aquifer was highly contaminated. The 1978 USGS report also indicated that the local aquifer moved toward the northwest, north, and northeast, rather than just toward the east as earlier indicated in the 1967 USGS report. Consequently, residents' wells, which were previously presumed safe from contamination, were now potentially polluted. In view of the continued complaints by numerous local residents, the Department of Health conducted further well water sampling tests in 1978. These tests revealed the presence of certain chlorinated hydrocarbons in numerous wells. Additionally, in 1978, the state, the USGS, the EPA, and Velsicol all commenced numerous extensive ground water surveys of the site and surrounding area. The surveys collectively identified twelve to fifteen drinking water wells, which were adjacent to the site, as contaminated with high levels of chlorinated hydrocarbons. Specifically, the surveys established that six of these wells were contaminated by carbon tetrachloride in excess of 100 parts per billion and high amounts of chloroform. The users of these wells, and all wells within 1,000 acres around the landfill site, were advised to stop using them for any purpose. ⁴

In 1978, forty-two plaintiffs sued Velsicol in the Circuit Court of Hardeman County, Tennessee, on behalf of themselves and all others similarly situated for damages and injunctive relief. The complaint sought $1.5 billion in compensatory damages and $1 billion in punitive damages. The defendant removed the action to the United States District Court for the Western District of Tennessee, alleging diversity of citizenship and the requisite amount in controversy. Shortly after removal, all but fifteen of the original forty-two plaintiffs settled their claims. Plaintiffs' counsel filed an amended complaint for damages and injunctive After a bench trial of the five claims, the district court found Velsicol liable to the plaintiffs on legal theories of strict liability, common law negligence, trespass, and nuisance. The court concluded that the defendant's hazardous chemicals, which escaped from its landfill and contaminated plaintiffs' well water, were the proximate cause of the representative plaintiffs' injuries. The district court awarded the five individuals compensatory damages totalling $5,273,492.50 for their respective injuries, plus prejudgment interest dating back to July, 1965, of $8,964,973.25. All damages, except for $48,492.50 to one plaintiff for property damage claims, were awarded for personal injuries. The district court also awarded $7,500,000 in punitive damages to the class as a whole. The court deferred to individual hearings, to be held after trial, the issues of causation and injury of any other persons purporting to be members of the class entitled to share in this award.

relief and added forty-seven new plaintiffs to the original lawsuit pursuant to Fed.R.Civ.P. 20(a). The complaint sought relief for involuntary exposure to certain chemical substances known to cause cancer, affect the central nervous system and permanently damage other organs of the human body, and for loss of value to their real property in the region affected by the chemicals. Additionally, seven individual civil actions involving fourteen plaintiffs were instituted against Velsicol alleging that the defendant negligently disposed of toxic chemical wastes. The district court, on its own motion and over the defendant's objection, certified a Fed.R.Civ.P. 23(b)(3) class action thereby consolidating the separate lawsuits. Thereafter, the plaintiffs' counsel filed a list of class action participants. At this time, the district court directed the plaintiffs' counsel to designate five representative plaintiffs whose claims were to be tried in the first instance to establish liability and damages on their individual claims, liability to the entire class, and punitive damages, if any. The class action proceeded to trial with the five representative plaintiffs proposed by the plaintiffs' counsel (Steven Sterling, Daniel Johnson, Curry Ivy, James Wilbanks, and James Maness, Jr.).

On appeal, the defendant argues that the district court lacked subject matter jurisdiction over the class members and impermissibly certified the case as a class action. The defendant further argues the district court erred in finding that the plaintiffs were exposed to its chemicals and that there was a causal connection between their exposure, if any, and their resultant injuries. Accordingly, the defendant asserts the district court improperly awarded compensatory damages to the plaintiffs for their alleged injuries. Defendant also asserts that prejudgment interest on the compensatory award and punitive damages should not have been awarded. We address the defendant's arguments seriatim.

II. SUBJECT MATTER JURISDICTION

The defendant argues that the district court lacked subject matter jurisdiction over all but two of the representative class plaintiffs. Velsicol states the remaining three representative plaintiffs, and all other putative class members, never formally filed any pleadings specifically alleging and justifying that the amount of controversy between each of them and the defendant exceeded $10,000. Velsicol further...