Illinois Appellate Court Issues a Win for Out-of-State Defendants in Asbestos Litigation Involving Non-Illinois Exposures

By and on July 24, 2018

On July 12, 2018, an appellate court in Illinois issued a long-awaited decision allowing the dismissal of an out-of-state defendant for lack of personal jurisdiction. Ruling on due process grounds, the court’s decision flies in the face of the common practice that allows plaintiffs in asbestos-related lawsuits to force out-of-state defendants into Illinois state court, including to the nation’s busiest asbestos docket, Madison County.

In Jeffs v. Ford Motor Company, plaintiff brought suit in Madison County, Illinois alleging that her deceased husband was exposed to asbestos-containing products in Michigan while working at Ford. The trial court denied Ford’s motion to dismiss for lack of personal jurisdiction, and instead found that Ford was subject to general, or all-purpose, jurisdiction in Illinois based on Ford’s substantial business dealings within the state. For an in-depth discussion of the trial court’s decision, please see our related post here.

In reversing the trial court’s decision, the appellate court considered both plaintiff and defendant’s interpretations of Daimler AG v. Bauman, but ultimately allowed much of their opinion to rest on Ford’s reliance on Aspen American Insurance Co. v. Interstate Warehousing, which the court found mandates a narrow definition of general jurisdiction under Illinois law. (For a discussion of Aspen, please see our related post here.) The appellate court found Aspen controlling when rejecting plaintiff’s argument that maintaining an agent to receive service of process—a condition of doing business in Illinois as an out-of-state corporation—was equivalent to consent to general jurisdiction. It further held that any argument equating registration with consent would similarly fail.

The appellate court next considered the Illinois long-arm statute’s ability to hale Ford into Illinois state court without case-specific contacts. The Illinois long-arm is limited only by the requirement that it comport with due process standards under the Illinois Constitution and United States Constitution. Under Aspen, because Ford is incorporated in Delaware and has its principal place of business in Michigan, it may only be subject to general jurisdiction in Illinois in “exceptional circumstances.” Consistent with Daimler and Aspen, a defendant may only be subject to general jurisdiction when their contacts are so continuous and systematic that the defendant is “essentially at home in the forum.” Looking to Ford’s contacts in Illinois: 7.5% of global employees, 5% of independent dealerships, 4.5% of sales, the court determined that despite Ford’s major business contacts, it could not be said to be essentially at home in Illinois.

Despite the fact that this opinion is unpublished and unable to be cited as precedent, its potential effect on future rulings should not be undervalued. Given that a once typical ruling in Illinois trial courts has now been reversed, at least in the Fifth District, it would seem likely that trial courts will now rule in favor of defendants asserting lack of personal jurisdiction in circumstances similar to those in Jeffs. Another interesting aspect will be how this ruling will affect filings in Madison County. All of this said, the presence of a potentially viable defense may not mean the end of litigation for a defendant asserting it. There remains the potential that plaintiffs may come to the individual defendant’s home state to sue them there. In some circumstances, this may still be a favorable outcome. In others, it may be best to remain in, for example, Madison County, for a variety of reasons. This is a strategic decision that should be carefully considered based on the facts of each individual case. Nonetheless, the Jeffs decision marks a clear procedural victory for out-of-state defendants in asbestos litigation involving non-Illinois exposures.

Filed under Asbestos, Illinois, Jurisdiction, Madison County, Illinois

Illinois Slashes Jury Size from 12 to 6 Effective June 1

By on April 16, 2015

In December 2014, in the final moments of the lame-duck session, Governor Pat Quinn (D) signed a bill into law reducing Illinois’s jury size from 12 to 6 and increasing juror pay. The law is effective June 1, 2015. The bill was passed without bipartisan support just as recently elected Governor Bruce Rauner (R) was set to take office. Governor Rauner is targeting the law for repeal, but this is likely a futile effort without the support of the Democrat-controlled Illinois General Assembly.

Previously, parties in a civil case were entitled to demand a 12-person jury. For cases filed before June 1, 2015, the parties are still entitled to a 12-person jury if demanded and paid for.

The law was passed under the guise of increasing juror pay. Jurors will now receive $25 for the first day of service, and $50 for each additional day. Presently, jurors in Cook County receive $17.20 per day, while jurors in some other Illinois counties receive the statutory minimum of between $4 and $10 per day. Supporters of the law maintain that reducing the jury size from 12 to 6 was a necessary corollary to offset the pay increase.

The measure is largely viewed as favorable to plaintiffs and unfavorable to defendants, as underscored by the fact that the bill was lobbied by the Illinois Trial Lawyers Association (plaintiffs’ bar) and generally opposed by the Illinois Association for Defense Trial Counsel. The defense bar contends that it is easier for plaintiffs to convince 6 jurors than it is to convince 12, which they must do as plaintiffs have the burden of proof. Stated differently, it is easier for the defense to convince 1 in 12 to hold out than it is to convince 1 in 6 to hold out. This is important as Illinois requires unanimous jury verdicts. The plaintiffs’ bar makes the counterargument that—on the flip side—where the defense has a strong case, it is less likely that a 6-person jury will have a holdout for the plaintiff than a 12-person jury. In other words, the plaintiffs’ bar maintains that the law is neutral on its face, and whichever side has the better case will win irrespective of jury size.

Proponents of the law point to additional advantages, including higher pay, shorter voir dire, reduced litigation costs, and fewer citizens being called to jury duty. Supporters claim that being called upon less often and being compensated better will make jurors more willing to serve. Proponents state that the increased pay is paramount, because—although Illinois has a law requiring employers to permit employees time off for jury service—Illinois does not have a law requiring employers to pay employees for their time spent serving on a jury.

Opponents are unwavering in their belief that the law was passed with the primary intent of decreasing the jury size, and that increasing juror pay was mere pretext. Indeed, perhaps many would have been in favor of increasing juror pay, so long as it was “paid for” with other government cuts.

Opponents cite to additional drawbacks. First, they contend that 12-person juries are more diverse, which means they more accurately reflect the views of the broader community. Second, 12-person juries have a better collective memory of the testimony and other evidence, thereby decreasing the likelihood that pure emotion and passion will infiltrate jury deliberations. Third, critics claim that dominant personalities can more easily sway 6-person juries than 12-person juries. Fourth, opponents suggest that there is less debate with 6-person juries, which are more likely to reach a consensus quickly.

Interestingly, this law becomes effective on the same day as a separate measure that excludes asbestos-related personal injury claims from the ten-year construction statute of repose. We previously blogged about this measure here. Both bills were heavily backed by Democrats and the trial lawyers who support them. Both bills were also signed into law by former Governor Quinn in the waning days of his gubernatorial term.

Filed under 12-Person Jury, 6-Person Jury, Asbestos, Construction Statute of Repose, Illinois, Illinois Association of Defense Trial Counsel, Illinois Trial Lawyers Association, Juror Pay, Jury, Jury Size

New Fracking Rules Unveiled for Federal Lands

By on March 30, 2015

On March 26, 2015, the Department of the Interior Bureau of Land Management (“BLM”) published its long-awaited final rule regarding hydraulic fracturing (“fracking”) in the Federal Register, which becomes effective 90 days after publication, on June 24, 2015.  The new rules mark the first update to federal fracking standards in more than 30 years.  The new rules are effectively the first rules that squarely address horizontal hydraulic fracturing, as the technology did not exist in present form when the old rules were enacted.

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Fracking is an increasingly common, and politically polarizing, method for extracting fossil fuels.  At bottom, fracking is a drilling technique used to recover gas and oil from shale rock.  The process involves drilling into the earth and then injecting a high-pressured cocktail of water, sand, and chemicals down and eventually across horizontally drilled wells.  The pressurized liquid fractures the subsurface rock, which consequently releases trapped oil and gas that is eventually pumped back to the surface.

Fracking is credited with advancing the recent U.S. “energy renaissance,” which has reduced oil prices to a two-decade low and allowed the U.S. to double its oil production from 2008 to 2015.  In fact, the U.S. is now poised to become the world’s largest producer of oil and gas.  Fracking is not without harsh and staunch critics, however, and the process has raised concerns among some regarding alleged contamination to groundwater, waste disposal, and the public’s exposure to toxic chemicals.  Ardent opponents also point to air emissions and climate change, excessive water consumption, and even the increased risk of earthquakes.  A recent Gallup poll suggests that Americans are equally divided on the use of fracking as a means of increasing natural gas and oil production in the U.S.

These concerns prompted several years of debate, culminating in the BLM’s final rules.  The BLM intends
for the new rules to “serve[] as a much-needed complement to existing regulations designed to ensure the environmentally responsible development of oil and gas resources on Federal and Indian lands, which were finalized nearly thirty years ago, in light of the increasing use and complexity of hydraulic fracturing coupled with advanced horizontal drilling technology.”  The BLM’s final rules are the first set in what is expected to be a series of federal rules governing fracking.

In sum, the new standards impose numerous new requirements on companies.  The hallmarks include:

  • Companies must publicly disclose additive chemicals used in the fracking process on FracFocus, which is an industry-run website, within 30 days of completing fracking operations.  This requirement, however, has already been adopted by many states that have examined the issue.
  • Companies must allow government employees to inspect and validate (1) the safety of the concrete barriers lining fracking wells, and (2) chemicals being stored at the fracking site.
  • Companies must adhere to new requirements and specifications or how to safely dispose of contaminated water.
  • Companies must submit detailed information about every proposed operation, including the location of faults and fractures, the depths of usable water, and the depth of estimated volume of fluid to be used.
  • Companies must submit detailed information about the geology, depth, and locations of already exiting wells.

Despite what many perceive as laudable objectives, the fear among oil and gas companies is that the BLM’s new rules will drastically increase production costs (thereby adversely affecting oil prices), as well as stifle energy development.  Indeed, the American Petroleum Institute (“API”), relying on research and consulting firm Advanced Resources International, analyzed a draft of the final rule and “estimate[d] that the total costs associated with this rule could range from $30 million per year to $2.7 billion per year.”  The API suggests that the requirement of “cement evaluation logs” (“CELs”) on surface and intermediate casing before beginning the fracking process as a source of added cost.  The Western Energy Alliance (“WEA”)—whose members include ConocoPhillips, Halcon Resources Corp. and QEP Resources Inc.—relying on an economic research firm’s analysis, provided a more focused prediction that the added cost of compliance would be $97,000 per new well, or $345.592 million annually.  The WEA warns that considerable costs will emanate from initial delay costs, administrative costs, enhanced casing costs, cement log costs for “well types,” and cement log delay costs.  Although energy trade associations are still assessing the precise costs of the new rules, many expect that the associated costs will greatly exceed the BLM’s rather conservative estimate of $11,400 per well, or $32 million annually.

The new rules have already prompted several lawsuits challenging their legality, characterizing them as “arbitrary and unnecessary burdens” that are “a reaction to unsubstantiated concerns.”  One lawsuit was filed by the Independent Petroleum Association of American and the Western Energy Alliance.  Another was filed by the State of Wyoming.  These parties are significant stakeholders that have a sizeable presence on federal lands, and consequently they have a lot to lose with the increased cost of compliance with the new rules.  Even for those entities intent on compliance, the new rules are lengthy and complicated, and will require legal consultation with attorneys specializing in the area.

As a final and important note, the rules apply to fracking on federal lands, which accounts for only approximately 10 percent of all fracking nationwide and 5 percent of all domestic oil production.  The states have jurisdiction over fracking on state-owned and private land, and thus the BLM’s new rules do not apply.  Accordingly, these rules do not affect the vast majority of U.S. fracking operations.  Nonetheless, the BLM hopes that its new rules will eventually serve as a model and legislative benchmark for states seeking to regulate the fracking industry within their borders.

Filed under Advanced Resources International, American Petroleum Association of America, American Petroleum Institute, Bureau of Land Management, Climate Change, Department of the Interior, fossil fuels, Fracking, Groundwater Contamination, Hydraulic Fracking, Hydraulic Fracturing, Western Energy Alliance

Fifth Circuit Holds Company Not Liable for Cleanup Costs Under Difficult-to-Establish CERCLA Arranger Liability

By on February 3, 2015

The Fifth Circuit recently issued a decision significantly limiting “arranger liability” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42 U.S.C. § 9607(a)(3).  The decision limited “arranger liability” to those who “take intentional steps to dispose of a hazardous substance,” and rejected imposing “arranger liability” on businesses that merely sell products used with hazardous substances.  Vine St. LLC v. Borg Warner Corp., No. 07-40440, 2015 U.S. App. LEXIS 581 (5th Cir. Jan. 14, 2015).

In Vine St., Norge (a former Borg Warner subsidiary) furnished dry cleaning equipment and an initial supply of perchloroethylene (“PERC”)—an expensive and potentially hazardous substance frequently referred to as “dry cleaning fluid”—to a dry cleaning business.  Additionally, Norge designed Vine Street’s drainage system by connecting the dry cleaning machines to the drains and sewer system.  As part of this system, Norge installed water separators to dispose of wastewater while simultaneously recycling PERC for future use.  As it turned out, the water separators were only about 95 percent effective, and some PERC discharged into the sewer.  The discharged PERC ultimately escaped from the sewer system and contaminated the properties of Vine Street and its neighbor.  After a bench trial, the district court ruled that Norge was liable to Vine Street for 75 percent of the costs associated with cleaning up the PERC.  Norge appealed.

In seeking an affirmance, Vine Street argued that Norge was correctly found liable under CERCLA because: (1) Norge intentionally disposed of PERC because it knew that the water separators were not effective; and (2) Norge engineered Vine Street’s drainage system.

In rejecting Vine Street’s arguments and reversing the district court, the Fifth Circuit relied on the U.S. Supreme Court’s decision in Burlington Northern & Santa Fe Railway Co. v. United States, 556 U.S. 599 (2009), which was decided after the bench trial finding Norge liable and clarified the applicable standard for CERCLA arranger claims.  In Burlington Northern, the Court interpreted “arrange” to mean “action directed to a specific purpose.”  Therefore, “an entity may qualify as an arranger under § 9607(a)(3) [only] when it takes intentional steps to dispose of a hazardous substance.”  Knowledge that one’s products would be used with hazardous substances is not enough to impose CERCLA liability.  “[K]nowledge alone is insufficient to prove that an entity ‘planned for’ the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product.”

Recognizing the “intent” requirement, Vine Street argued in the alternative that—even if Norge did not intend to specifically pollute the groundwater—it nonetheless intended for PERC to discharge into the sewer.  The Fifth Circuit was unmoved by this argument.  “Although the distinction between an intentional and a knowing act is a relatively fine one,” Norge simply did not intend to dispose of PERC.  Rather, the purpose of the transaction between Vine Street and Norge was plainly to sell PERC and dry cleaning equipment, two unused, useful products.  The court found the fact that Norge engineered Vine Street’s drainage system inconsequential to the intent analysis.  Both parties intended the water separators to be effective in recycling the expensive PERC for future use; indeed the water separators’ success was imperative to both Vine Street’s and Norge’s business objectives.

The key takeaways from Vine Street and Burlington Northern are: (1) CERCLA arranger liability is premised upon an intentional act directed toward the disposal of hazardous waste; (2) intent stands in contrast to mere knowledge that waste will be disposed; and (3) therefore, CERCLA arranger liability should be a relatively difficult threshold for future CERCLA plaintiffs to satisfy.

Filed under Arranger Liability, CERCLA, Dry Cleaning, PERC, Perchloroethylene