Bowen v. Amoco Pipeline, 00-7039

• Decision Date: 02 July 2001
• Docket Number: 10,00-7039
• Parties: ERNEST BOWEN; MARY BOWEN, Plaintiffs - Appellees, v. AMOCO PIPELINE COMPANY, Defendant - Appellant.UNITED STATES COURT OF APPEALS TENTH CIRCUIT
• Court: U.S. Court of Appeals — Tenth Circuit

ERNEST BOWEN; MARY BOWEN, Plaintiffs - Appellees v AMOCO PIPELINE COMPANY, Defendant - Appellant

No. 00-7039

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

July 2, 2001

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF OKLAHOMA

(D. Ct. No. 98-CV-243-S)

Stephen Ward, Gardere, Wynne, Sewell, LLP, Tulsa, Oklahoma, and G. Steven Stidham, Sneed, Lang, P.C., Tulsa, Oklahoma (Brian S. Gaskill and Steven K. Balman, Sneed, Lang, P.C., Tulsa, Oklahoma, and Steven J. Adams, Gardere, Wynne, Sewell, LLP, Tulsa, Oklahoma, with them on the briefs), appearing for Appellant.

Michael L. Darrah, Durbin, Larimore & Bialick, Oklahoma City, Oklahoma (Bill M. Roberts and Katherine T. Loy, Durbin, Larimore & Bialick, Oklahoma City, Oklahoma, and Allan DeVore, The DeVore Law Firm, P.C., Oklahoma City, Oklahoma, with him on the brief), appearing for Appellee.

Before TACHA, Chief Judge, GIBSON,^* and LUCERO, Circuit Judges.

TACHA, Chief Judge.

Defendant Amoco Pipeline Company appeals from the district court's confirmation of an arbitration award. We exercise jurisdiction pursuant to 29 U.S.C. 1291 and affirm.

I. Background

1. Facts

In 1993, Ernest Bowen noticed an oily sheen in Flag Branch Creek, which is located on his property. After investigating the matter, the Oklahoma Corporate Commission (OCC) concluded remediation of the creek would be more detrimental than beneficial. In 1993, however, Mr. Bowen again observed a sheen in the creek, after which he notified the Pollution Control Division of the OCC, as well as Amoco Pipeline Company (Amoco) and Koch Gathering Systems, Inc. (Koch). Both Amoco and Koch own oil pipelines that cross the creek; Koch owns two idled lines and Amoco owns two idled lines and two active lines. After being notified by Mr. Bowen, Amoco retained Geosearch Environmental to determine the source of the sheen. Although Geosearch found hydrocarbon contamination near the creek, it concluded the source was an upstream historic release of oil, rather than a leak from Amoco's pipelines. Contrary to Amoco's conclusions, research conducted by Mr. Bowen's expert, Fox Hollow Consultants, Inc., suggested that a leak in Amoco's lines may be the source of contamination. Under Fox Hollow's theory, oil had leaked from Amoco's lines, migrated downward to the water table about nine feet below, and then floated on the water table to the creek.

In a memorandum dated September 1996, the OCC summarized the information available regarding the contamination in Flag Branch Creek and reached some conclusions. In evaluating potential sources of the contamination, the OCC dismissed oil wells and old documented pipeline leaks. No oil well was close enough to the creek to be the source, and the two nearby documented leaks from Koch pipelines could not have contaminated Flag Branch Creek because they were contained within their immediate spill areas. Because wells and documented leaks were not the source, the OCC concluded the source of the hydrocarbon contamination must be an undocumented leak from one of the six pipelines. Through deductive reasoning, the OCC arrived at a theory similar to that proposed by Fox Hollow Consultants: oil from one of the lines leaked into the porous sandy alluvial deposits, migrated downward to the water table approximately nine to ten feet below the surface, and floated on the water table to the creek. In order to determine the source, the OCC recommended Koch and Amoco uncover their lines in order to expose any visual evidence of historic or current leaks.

Despite Amoco's repeated assertions of its good corporate citizenship and willingness to follow all rules and regulations, it refused to follow the OCC's recommendation and uncover its pipelines, arguing uncovering the lines would be unnecessary and jeopardize the lines' safety. After performing some trenching around its lines and finding no hydrocarbons, Amoco continued to deny any responsibility for the contamination but emphasized that, were Amoco the responsible party, it would clean up the pollution. In April 1997, Koch concluded its investigation. The following month, the OCC sent Amoco a letter explaining that Koch's information indicated Amoco's pipeline on the east side of the creek may be the source of contamination. Despite this information, Amoco continued its refusal to strip the lines, offering instead to do some soil borings and recommending the Oklahoma Energy Resources Board (OERB) become involved.

Displeased with Amoco's continued denial of any responsibility, Mr. and Mrs. Bowen filed a lawsuit in May 1998 in federal district court, asserting a cause of action for damages to real property, nuisance, trespass, unjust enrichment, breach of contract, and exemplary damages. In July, Amoco asked the district court to stay the proceeding and order the dispute to arbitration pursuant to an enforceable arbitration agreement.¹ In arguing their motion to compel arbitration, Amoco contended the arbitration panel would have the power to decide all claims, an assertion they now refute. The Bowens objected to arbitration, challenging the arbitration agreement as unenforceable. In October 1998, the district court granted Amoco's motion and entered an order compelling arbitration.

In July 1998, Amoco responded to the Bowens' interrogatories, continuing to deny its lines were the source of hydrocarbon contamination in the creek. In addition, Amoco explicitly denied that any leaks or spills attributable to its pipeline operation had occurred on the Bowens' property and even denied the existence of pollution in the soil. The following month, Fred Hesser, a district environmental health and safety coordinator for Amoco, stated in his deposition that from 1995 to January 1998 he encountered no evidence indicating Amoco might be the source of the contamination. In October, however, Amoco's tests confirmed the presence of hydrocarbons in the soil under its lines but found no contamination in the groundwater.

In June and July of 1999, three years after the OCC recommended that Amoco uncover its pipelines, Amoco exposed limited portions of its lines on the Bowens' property and admitted the existence of contaminants next to the lines.

Significantly, the stripping of the lines revealed a pipeline replacement in the contaminated area. Less than two months before the arbitration hearing, the Bowens discovered that Amoco had replaced approximately 1,000 feet of pipeline on the east side of the creek. According to the Bowens' expert, the 1,000 feet of replaced pipeline corresponds almost exactly with the contaminated creek area. Although Amoco had not explicitly disclosed the line replacement and had repeatedly denied any link to the contamination, it claimed to have provided the Bowens with a line sheet showing the replacement. Amoco did not, however, explain the information contained in the line sheet, which was technical and difficult to read, until the arbitration hearing when its employee testified that approximately 1,000 feet of pipeline was replaced in 1950.

Other than the line sheet, Amoco claimed it could find no other records detailing the reasons for and circumstances surrounding the 1950 line replacementdespite some testimony that it was corporate practice to keep such records.² Although Amoco's employees and experts argued the line replacement could have been a preventative measure, they admitted a leak in the line would be one explanation for the line replacement and for the concentration of crude oil in the soil in that exact location. Moreover, after years of denying any connection to the contaminated soil, Dennis Beckman, Fred Hesser's replacement, finally testified that the hydrocarbon-contaminated soil under the replaced pipelines was probably from Amoco's line. Testing by Amoco's own expert confirmed the oil around the replaced lineas well as the oil in the creekwas at least twenty years old, further evidence that the more recent leaks from Koch's pipelines were not the source. Another Amoco employee also testified that, in 1974, Amoco routinely left oil in the soil around a pipeline after fixing a leak. Occasionally, Amoco would excavate the contaminated soil, replace it with clean soil, and then spread (land farm) or deposit the contaminated somewhere else on the property. Given this practice, the Bowens argued a contaminated area of soil away from the replaced line was the location where Amoco deposited excavated soil after the 1950 replacement.

Although Amoco changed its initial theory and admitted its lines might be the source of contamination in the soil, it continued to claim no responsibility for the hydrocarbon contamination in the creek. Admitting a small two-barrel leak may have occurred in 1952, Amoco continued to deny any connection to the contamination in the creek. Amoco contended that, despite the contamination in the soil around its pipelines, the hydrocarbon levels in the groundwater did not exceed EPA standards, and because the pollution in the soil was not reaching the water table, it was not reaching the creek. In addition, Amoco continued to refute the Bowens' assertion that soil excavated from around the replaced line in 1950 was deposited in another location; although the record contains various characterizations of this site, Amoco appears to argue it is an old drilling site or the site of a historic pit used by others.

1. The Arbitration

The Bowens' case was tried to a panel of three arbitrators in August 1999.

The parties agreed to use the Rules for Non-Administered Arbitration of Business Disputes (NABD), but they also agreed to modify these rules to expand the scope of judicial review. Specifically, the parties agreed that both would have the right to appeal any arbitration award to the district court within thirty days "on the grounds that the award is not supported by the evidence." They also agreed that the district court's ruling "shall be final."

On October 18,...