Total Renal Care Inc. v. Childers Oil Co.

• Citation: 743 F.Supp.2d 609
• Decision Date: 28 September 2010
• Docket Number: Civil Action No. 10–33–ART.
• Parties: TOTAL RENAL CARE, INC., Plaintiff,v.CHILDERS OIL COMPANY, et al., Defendants.
• Court: U.S. District Court — Eastern District of Kentucky

743 F.Supp.2d 609

TOTAL RENAL CARE, INC., Plaintiff,

v.CHILDERS OIL COMPANY, et al., Defendants.

Civil Action No. 10–33–ART.

United States District Court,E.D. Kentucky,Southern Division,Pikeville.

Sept. 28, 2010.

J. Steven Kirkham, Michael T. Harmon, W. Travis Parham, Waller, Lansden, Dortch & Davis, LLP, Nashville, TN, for Plaintiff.Drew Byron Meadows, J. Dale Golden, Melissa Mae Thompson, Golden & Walters PLLC, Lexington, KY, for Defendants.

MEMORANDUM OPINION & ORDER

AMUL R. THAPAR, District Judge.

Disaster strikes. An oil spill contaminates a river and poisons a city's water supply. The environmental calamity affects many property owners and businesses in the city, several of whom sue the oil company responsible for the spill in state court. But one of the businesses harmed by the spill decides to sue the oil company in federal court. Should the federal court dismiss the case because the state court actions arise from the same environmental disaster and involve similar issues? That is the question this case presents.

The defendants, Childers Oil Company and Mountain Rail Properties, filed a motion to dismiss the plaintiff, Total Renal Care's (“TRC”), complaint. R. 17. The defendants urge the Court to abstain from exercising jurisdiction under Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), because of pending state court actions involving the same incidents from which TRC's claims arise. The defendants also argue that TRC's complaint fails to state a claim upon which relief can be granted. Because the facts of this case do not warrant abstention under Colorado River and because TRC's complaint, construed in the light most favorable to TRC, does not fail to state a claim, the defendants' motion to dismiss will be denied.

BACKGROUND

On or before November 1, 2008, the defendants dumped sludge from one of their oil plants into a plastic-lined pit located next to the Kentucky River in Whitesburg, Kentucky. R.1 ¶ 13. Contaminants from the pit seeped into the river and flowed downstream to a drinking water treatment plant operated by Veolia Water. Id. ¶ 14. The plant provides water to the residents and businesses of Whitesburg. Id. ¶ 7. After workers at the treatment plant noticed a strong smell of gasoline, Veolia Water shut the plant down for several days. Id. ¶ 14. Kentucky officials determined that the defendants' sludge pit was the source of the contamination. Id. ¶ 16. The state environmental agency issued a consumer advisory to residents of Whitesburg informing them that they should not use water for anything other than flushing. The advisory remained in effect for five days, from November 1 thru November 6, 2008. Id. ¶ 17.

TRC owns and operates a dialysis clinic in Whitesburg. Id. ¶ 8. Dialysis is a treatment for individuals who experience kidney failure. Dialysis cleans the blood in the patient's body by passing it through a special machine. The process requires a large amount of water, and the water must be pure. Because the water is in nearly direct contact with the patient's blood, any impurities or contamination could be extremely dangerous to a patient's health. Id. ¶¶ 9–10. TRC's dialysis clinic relies on water from the Whitesburg plant, which it then processes to further purify. Id. ¶ 11. The contamination of the local water supply forced TRC to close its clinic for five days, from November 1 thru November 6, 2008. Id. ¶ 25.

As if the residents of Whitesburg had not already been through enough, a diesel fuel storage tank on the defendants' property began leaking into the river in February 2009, just a few months after the first spill. Id. ¶ 21. The diesel fuel flowed downstream, again, contaminated the water in the treatment plant, again, led Kentucky officials to issue a water quality advisory, again, and forced TRC to close its dialysis clinic, again. Id. ¶¶ 21–24, 26. This second contamination closed TRC's dialysis clinic for nine days, from February 16 thru February 25, 2009. Id. ¶ 26.

TRC filed this action on March 10, 2010. The complaint alleges that the defendants were negligent in causing both contaminations. Id. ¶¶ 28–44. TRC seeks compensation for the revenues it lost by not treating patients during the periods it had to close as well as significant expenses associated with cleaning the dialysis equipment in the clinic. Id. ¶ 27. TRC also seeks punitive damages.

But TRC's lawsuit is not the only piece of litigation to come out of the two contamination incidents. The spills poisoned an entire city's water supply and damaged property values. Several other plaintiffs have filed lawsuits against the defendants in state court arising out of these same incidents. See R. 17, Attach. 2–5. At least four separate actions are currently pending in the Letcher Circuit Court before Special Judge James L. Bowling, Jr. R. 17, Attach. 1 at 2.

DISCUSSION

The defendants argue that the Court should dismiss TRC's complaint for two reasons. First, they urge the Court to abstain from hearing TRC's case because parallel proceedings in state court will determine the same issues, and therefore allowing this case to go forward would waste judicial resources and expose the defendants to the possibility of inconsistent judgments. Second, the defendants argue that TRC's complaint should be dismissed for failure to state a claim because an independent superseding cause—the water treatment plant's failure to remove the contaminants—caused TRC's injuries, and at any rate, TRC's injuries are purely economic, and therefore are barred by the economic loss rule. None of the defendants' arguments are convincing.

I. Colorado River Abstention is Not Warranted

The defendants first ask the Court to take an extraordinary step—to refuse to exercise its constitutionally-vested jurisdiction and disrupt TRC's choice of forum because pending cases in state court involve similar issues. There are certain extraordinary cases in which abstention because of parallel litigation in state courts is appropriate. This case is not one of them.

Federal courts have a “virtually unflagging obligation ... to exercise the jurisdiction given them.” Colorado River, 424 U.S. at 816, 96 S.Ct. 1236. Despite this obligation, there are certain exceptional circumstances in which a federal court should abstain from hearing a case that is properly before it. These circumstances involve unique interactions between state and federal law and are grounded in “considerations of proper constitutional adjudication and regard for federal-state relations.” Id. at 817, 96 S.Ct. 1236. The Supreme Court has said that abstention is appropriate where a federal case presents a constitutional issue that might be mooted or significantly altered by a state court's construction of state law, see Allegheny County v. Frank Mashuda Co., 360 U.S. 185, 189, 79 S.Ct. 1060, 3 L.Ed.2d 1163 (1959), where a case presents important questions concerning state public policy and the state courts have not yet authoritatively interpreted a controlling statute, see Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25, 31, 79 S.Ct. 1070, 3 L.Ed.2d 1058 (1959) (Stewart, J., concurring), and where litigants have invoked federal jurisdiction for the purpose of restraining state criminal proceedings, see Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). In Colorado River, the Supreme Court created another category of abstention—where a case in federal court involves substantially the same issues and substantially the same parties as a parallel case in state court. 424 U.S. at 817–21, 96 S.Ct. 1236.

The Colorado River case was about water rights. Under Colorado law, specialized state courts had authority to adjudicate water disputes. While a suit concerning rights to certain water was pending in state court, the United States instituted a suit in federal court to establish its rights and the rights of certain Native Americans to that same water. 424 U.S. at 805–06, 96 S.Ct. 1236. One of the defendants in the state court action impleaded the United States into the state case in the hopes of adjudicating all claims to the same water in that action. Id. at 806, 96 S.Ct. 1236. The district court then abstained from hearing the suit the United States had instituted because of the parallel state court litigation. Id. The Supreme Court held that the district court's abstention was appropriate. Id. at 820, 96 S.Ct. 1236.

The Court began by emphasizing that “[a]bstention from the exercise of federal jurisdiction is the exception, not the rule.” Id. at 813, 96 S.Ct. 1236. The Court noted that the case did not fit into any of its existing abstention doctrines. Id. at 817, 96 S.Ct. 1236. Nevertheless, the Court upheld the district court's decision not to hear the case. Relying on “considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation,” the Court held that, in certain “exceptional” cases, a federal court could decline to hear a case where concurrent state court litigation involves the same parties and the same issues. Id. at 817–18, 96 S.Ct. 1236. The Court listed a number of factors that inform the analysis, made clear that all of the factors should be weighed together, and concluded that the district court's dismissal in light of the pending state litigation was justified. Id. at 818–19, 96 S.Ct. 1236. In particular, the Court emphasized that both the state and federal actions concerned rights to the same water. Id. at 819–20, 96 S.Ct. 1236. Therefore, the possible prejudice from inconsistent verdicts was significant—if the state court and the federal court determined that different parties had rights to the same body of water, there would be a serious problem.

In subsequent cases, the Supreme Court has emphasized that Colorado River abstention should be an extraordinary, and extraordinarily rare,...