The California Court of Appeal, Second District, threw out a jury award of $14,275,237 in damages against Shell Oil Co. in an action by plaintiff Watson Land Company concerning groundwater and soil contamination from a gasoline pipeline leak. The appellate court ruled that the jury erred when it found that Shell derived a $14,275,237 “benefit” from the leak and resulting contamination, and misapplied Civil Code section 3334 in awarding that amount to plaintiff.

Watson Land Company discovered in 1995 that soil and groundwater beneath its commercial/industrial park, the Watson Center, had become contaminated with petroleum substances. Watson subsequently learned that Shell gasoline pipelines running beneath Watson Center were a likely contributor. Watson sued Shell and ARCO in 1996 on 11 causes of action, including nuisance and trespass. The jury found in favor of Watson on its claim of continuing trespass, and awarded plaintiff $3.9 million in cleanup costs to remediate the property. In addition, the jury applied Civil Code section 3334 – allowing a plaintiff to recover the benefits obtained by a trespasser from its trespass – and determined the value of the benefits obtained by Shell from the trespass caused by its pipeline leak between June 1993 and June 2001 to be $14+ million on a disgorgement-of-profits analysis.

Shell argued on appeal that a gasoline leak from one of its pipelines did not constitute a “benefit” to Shell as contemplated by Civil Code section 3334, and the Court of Appeal agreed:

“?a trespass must result in something advantageous for the trespasser or its does not qualify as a benefit for purposes of the statute. Here, the question is whether Shell’s pipeline leakage and the resulting contamination of Watson’s land can be considered something advantageous for Shell. We think not. Not only did the gasoline leakage result in a loss of product for Shell, but it meant that pipelines either had to be repaired or abandoned and replaced by different pipelines at substantial cost.” 130 Cal.App. 4th 69, 77-78.

The court noted that while it was correct that the legislative purpose of Civil Code section 3334 was to provide a disincentive to would-be polluters to trespass by dumping hazardous wastes on another’s property so as to avoid proper disposal costs, that situation was not present here. The owner of a leaking pipeline does not gain from the leak happening, and so “there is no need to impose a special disincentive to trespass.” 130 Cal. App. 4th at 78. While plaintiff argued that “benefits” under the statute should include the defendant’s avoidance of cleanup costs of the damaged property, the court rejected that notion since the statute already provided for recovery of the reasonable cost of repair or restoration of the trespassed-upon property, and the jury had awarded a separate sum for that which the appellate court affirmed.

This ruling may provide useful guidance to litigants in groundwater and soil contamination cases, which routinely include trespass claims. The opinion has been certified for partial publication as Watson Land Co. v. Shell Oil Co., 130 Cal.App. 4th 69 (2005).

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