Gov. Bobby Jindal's meme that the local levee board's landmark environmental lawsuit against nearly 90 energy companies is frivolous got shot down last week — not by supporters of the suit but by a pair of Texas oil companies that were named as defendants in the litigation. The two companies settled out of court with the Southeast Louisiana Flood Protection Authority-East (SLFPA-E) for $50,000.
On its face, the dollar amount of the settlement doesn't sound like much, but several factors make the settlement a really big deal. Consider these:
• The settlement marks the first time that energy companies have agreed to pay money damages for increased public exposure to hurricane-related flooding due to their operations in coastal wetlands — even if they haven’t expressly taken responsibility for any damages.
• The settlement comes very early in the litigation process. Both sides are still arguing about whether recent anti-lawsuit legislation even applies to this case (and, if it does, whether the new law is constitutional). Neither side has taken the first deposition. That signals a genuine concern, if not fear, among some defendants that the lawsuit poses a serious threat to their bottom lines.
• The two defendants that settled — White Oak Operating Co. and Chroma Operating Inc., both of Houston — are among the smallest operators of the named defendants. Their operations were limited to less than 100 linear feet of a single spoil bank, among nearly 700 miles of pipeline canals that are the subject of the litigation — and the companies operated there for only two years. The lawsuit alleges environmental damages going back 80 years. Mathematically and legally, the $50,000 paid by White Oak and Chroma actually portend billions in potential damages against larger companies that operated in much larger footprints over much longer periods of time.
White Oak and Chroma are privately held companies, in contrast to some publicly traded "majors" that are also defendants in the case. The two Texas companies probably needed to get the potential exposure for damages off their balance sheets in order to look better to potential lenders and/or investors — and to eliminate any actual exposure. The lawsuit seeks to hold all defendants "jointly" liable, which means any or all of them could be targeted for collection of all potential damage awards.
Most of all, the settlement sends a message that energy companies do not all agree with Jindal that the lawsuit is frivolous. As in criminal cases, the first defendants to settle in multi-party civil cases typically get the best deals. Strategically and financially, settling was a smart move for White Oak and Chroma. Others may not be far behind, which will really give the lawsuit some momentum.
"Given that [the flood protection authority] named White Oak and Chroma for the same relatively limited footprint, and that at this early point in the litigation the parties had clear and simple positions, we are pleased to have come to what all sides feel are reasonable, responsible terms," attorneys for both sides said in a prepared statement. SLFPA-E board chair Steve Estopinal promised that "every dollar" of the settlement will be used for coastal restoration and flood protection.
Two decades ago, when a group of big-time plaintiff lawyers sued the major tobacco companies, Big Tobacco initially took a "no prisoners" position — until one of the smaller companies settled. That ultimately brought the rest to the negotiating table. The end result was a multi-billion-dollar settlement.
It's too early to tell if that scenario will play out in the SLFPA-E lawsuit, but other defendants cannot possibly welcome news that two of their number are cutting their losses. Look for more defendants — small and not so small — to settle in the weeks ahead.
It also will be interesting to see how this plays out politically. If other defendants start settling, it will not only disprove Jindal's "frivolous lawsuit" claim but also bolster political opposition to his efforts to replace pro-lawsuit SLFPA-E board members with lackeys who promise to scuttle the suit.
Jindal will doubtless mock the small sum paid by White Oak and Chroma, but that will be just one more example of him ignoring reality.