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Understanding the legal procedures to follow in the aftermath of an industrial accident can help companies to move forward more smoothly
In recent years, there has been an uptick in so-called “parallel proceedings,” which occur when administrative, civil and criminal enforcement actions are taken against the same or related parties, stemming from the same or related facts, such as in the case of large-scale industry accidents. The situation has become even more complicated due to a recent legal decision that confirms the authority of the U.S. Chemical Safety and Hazard Investigation Board (CSB; Washington, D.C.) to subpoena records in an investigation of a 2015 explosion at an ExxonMobil petroleum refinery located in Torrance, Calif. U.S. v. Exxon Mobil Corporation, Case No. 2:17-mc-00066-CBM-PJW (9th Cir. 2019).
Chemical companies and their in-house legal departments should prepare detailed plans and procedures for dealing with the inevitable challenges that arise in parallel proceedings. For instance, chemical companies should have procedures in place for responding to multiple regulators requesting a slew of varied information during the stress of an event, or in its immediate aftermath. Also, chemical companies should have clear document-retention policies to make sure relevant and potentially relevant information and materials are not inadvertently deleted or lost. Finally, chemical companies should carefully weigh the benefits of disclosing possibly privileged information to regulators, versus the costs of that privileged information falling into the hands of other regulators and private plaintiffs.
The 2015 Torrance explosion
The ExxonMobil case stemmed from a 2015 explosion in a gasoline processing unit at ExxonMobil’s refinery in Torrance, California. The explosion led to four workers suffering minor injuries and debris being dispersed into the surrounding community. The explosion and subsequent fire tore through the gasoline processing unit, and hurled a 40-ton piece of debris into the air that narrowly missed the alkylation unit. The alkylation unit was five feet from yet another unit containing modified hydrofluoric acid, which is highly corrosive and can dissolve tissue and bone. The explosion registered as a magnitude 1.7 tremor on the Richter scale, and students at fourteen nearby schools were ordered to remain indoors because of concerns over air quality.
The CSB steps in
Following the explosion, the CSB requested records related to the alkylation and modified hydrofluoric acid units, which ExxonMobil refused to produce, arguing that because there was no damage to either unit (because the units were not “directly” involved in the explosion), the CSB lacked the authority to investigate those aspects of the refinery’s operation. The CSB disagreed, arguing that it was authorized under federal law [42 U.S.C. § 7412(r)(6)(C)(i)] to not only investigate the “cause or probable cause of any accidental release,” but also its “facts, conditions, and circumstances,” the latter of which included the near-misses at the alkylation and modified hydrofluoric acid units.
Although the District Court agreed with ExxonMobil, the Ninth Circuit Court of Appeals sided with the CSB, finding that although the requests related to aspects of the operation that were not directly involved in the explosion, the CSB still had the right to the information because the “presence of two tanks full of toxic chemicals on the site of the explosion, very close to where debris from that explosion landed, is among the ‘circumstances’ of the explosion.” In support of its decision, the Ninth Circuit emphasized that a correct interpretation of the CSB’s statutory authority, coupled with applying the general relevance standard inherent in litigation in general, compelled a finding that the documents requested relating to the alkylation and modified hydrofluoric acid units were “relevant to the Chemical Board’s investigation of the February 2015 accidental release.”
Parallel proceedings in the aftermath of the 2015 explosion
As well as causing gasoline prices to spike as high as $1.50 above the national average as a consequence of the outage caused by the explosion, ExxonMobil’s Torrance refinery became the focus of complicated parallel proceedings at the federal, state, and local levels. Although the investigation was spearheaded by the CSB, other agencies involved included the U.S. Environmental Protection Agency (EPA), the South Coast Air Quality Management District, the California Department of Industrial Relations, and California’s Division of Occupational Safety and Health.
Strategies for responding to parallel proceedings
Many chemical companies will encounter some form of parallel proceeding over the course of their operations as a result of a release or leak, or other serious incident. Given the considerable civil penalties at stake — and the often-contentious battle among regulators to secure fines and penalties for their respective agencies — chemical companies are well-advised to implement policies and plans for managing parallel proceedings at their early stages.
The dilemma becomes: How does a chemical company respond to the questions and demands of one regulator so that it does not jeopardize its position with respect to other regulators, or with potential private plaintiffs? There is no easy answer to this question, but there are some proven strategies for dealing with the problem, including the following:
- Determining (by asking directly and documenting the responses) which regulator has primary responsibility and/or jurisdiction
- Issuing litigation holds and preserving relevant information and documents that are, or may become, relevant
- Preserving the attorney-client privilege, and other litigation privileges
Regulator leading the charge
It is important in the early stages of parallel proceedings to identify the regulator with primary authority and ask that document and interview requests flow through that regulator. This will minimize the chance of duplicative, conflicting or confusing requests for information by multiple agencies at the same time. The primary agency is often determined by which agency has subject matter jurisdiction — meaning the agency that has authority to oversee the type of case or matter involved. For instance, the CSB had primary responsibility for investigating the Torrance explosion because it involved a chemical release. However, joint investigations by multiple agencies are common, especially when the focus of the proceedings does not fall squarely under one agency’s jurisdiction.
Preserving relevant information
In both federal and state courts, it is well-settled that a party has a duty to preserve material it knows or suspects is relevant to current or possible future litigation. Parallel proceedings make this a confounding duty, because what starts as a simple inquiry or request from one agency can spiral into a flurry of demands from other agencies. Therefore, chemical companies should implement procedures aimed at preserving information sought by the regulators, and equally important, any additional information it reasonably thinks might be requested that relates to the incident. For example, ExxonMobil should have preserved all information related to the alkylation and modified hydrofluoric acid units, since it was reasonably foreseeable for a regulator to request that information given the proximity of the debris to the units.
Preserving the attorney-client privilege
Lastly, companies should pay considerable attention to maintaining the attorney-client privilege, as well as other litigation privileges, over the course of parallel proceedings. All too commonly, regulators offer cooperation credit in exchange for waiving privileges, but companies should be wary of accepting such offers, as there is a chance that the waiver will not be limited to that specific investigation, but also applied to other regulators’ investigations, and also to subsequent private litigation. For instance, a class-action lawsuit filed on behalf of nearby Torrance residents is currently pending against ExxonMobil related to the same incident. If ExxonMobil waived privileges in order to work with regulators and reduce the ultimate penalties, that privileged information might be used by class-action counsel in the new lawsuit. ♦
Edited by Mary Page Bailey
Davina Pujari is the co-chair of the Environment and Natural Resources Group at Hanson Bridgett LLP (Same address as above; Email: email@example.com; Phone: (415) 995-5077). She is an experienced trial attorney who has practiced environmental and criminal law for over twenty-five years, handling complex matters in federal and state court. Pujari focuses on the defense of environmental enforcement actions and prosecutions, environmental litigation against the government and between companies, allocation of environmental costs, and internal investigations.
Cole Benbow is an attorney at Hanson Bridgett LLP (425 Market Street, 26th Floor, San Francisco, CA 94105; Email: firstname.lastname@example.org; Phone: (415) 995-5128). He focuses his practice on litigation and dispute resolution in both state and federal courts. Benbow has experience litigating environmental disputes, as well as general commercial and business disputes. His wide-ranging practice has involved cases dealing with children’s products, chemicals, consumer goods, asbestos, and other toxic substances.
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