Oil and natural gas production promises to pump billions of dollars into northeast Ohio’s faltering economy. Energy companies with plans to tap into the Utica and Marcellus shale deposits in Ohio stand to create around 17,000 jobs and generate around $34 billion dollars over the next five years. These energy companies have already become targets for litigation by landowners. With well-drilling and production about to take off, a wave of litigation is likely right around the corner. A recent decision from a Cleveland federal judge allowed an allegedly aggrieved landowner broad discretion in who it must include as a defendant in its lawsuit.
In Boggs v. Landmark 4 LLC, a landowner sued an oil and gas well operator for damages arising from allegedly negligent handling of fracking fluids (the chemicals and products used to extract natural gas from shale deposits). The landowner sued only the company that operated the well (Landmark) – and not the company that actually performed the drilling. Landmark asked the Court to dismiss the case, arguing that the landowner’s failure to include the drilling company in its suit was a failure to join a necessary party under the rules governing civil litigation in federal courts.
The U.S. District Court in Cleveland denied Landmark’s motion to dismiss and held that, although the drilling company might also be liable to the landowner for any negligent handling of fracking fluids, the landowner was within its rights to sue only the well operator. The Court stated that while the well operator could seek indemnity or contribution from the drilling company if it was ultimately found liable to the landowner, there was no need to decide that issue as part of the landowner’s suit. The Court found that U.S. Supreme Court precedent clearly stated that “joint tortfeasors are not necessary parties” and allowed the suit against the well operator to proceed.
In other words, according to this decision, landowners are not required to sue all companies involved in drilling a particular well; they need only identify a target large enough to satisfy a judgment and can leave the companies to sort out the apportionment of the damages amongst themselves at a later date. Companies who may be targets for litigation should consider proactively addressing such issues by indemnification and other contractual provisions with companies with which they do business in well-drilling and related cases.
The decision in Boggs v. Landmark 4 LLC, U.S. Dist. Court N.D. Ohio, Case No. 1:12 CV 614, is available at: http://bit.ly/PCyIgW.
Barnes & Thornburg Toxic Tort Practice Update, Spring 2013