An appeals court has upheld a $6.6 million jury verdict against two big chemical manufacturers for damages caused by faulty plastic pipes used to carry drinking water to houses.
The unanimous decision will help pay for damages caused by thousands of burst pipes in Contra Costa and Alameda counties. It may also influence future litigation regarding similar pipes pending around the country, according to plaintiffs lawyers.
The East Bay counties were among the first to use the pipes extensively. Wednesday's opinion from the First District Court of Appeal is one of the first appellate court decisions upholding a jury verdict regarding the pipes, said Paul Fogel, an attorney with Reed Smith Crosby Heafey, who represented plaintiff East Bay Municipal Utility District on appeal. As such it might influence future litigation.
"If I were Shell and I saw a Court of Appeal uphold a verdict after a three-month trial with competing expert testimony ... I might look a little more seriously at future lawsuits," Fogel said. He emphasized, however, that every suit depends on case-specific factors and the product liability laws of the particular state.
The pipes, made of polybutylene resin, became popular in the late 1960s, when water districts began using them to connect homes to water mains in the street. They were cheaper, lighter and easier to install than their copper predecessors. Most of the pipes installed by EBMUD were made from resin manufactured by Shell Oil and FMC Corp. and specifically designed for that purpose.
In the early 1990s, the pipes began to burst. Water rushed out, raising the ground and cracking the pavement. Water destroyed meter boxes and flooded homes and businesses. The problem was particularly expensive to clean up because crews were summoned on short notice and often paid overtime.
In a three-month trial before San Mateo County Superior Court Judge John Schwartz, EBMUD experts said the pipes were susceptible to failure because the cold water flowing through them speeds the oxidation process. The defendants claimed that the district's poor installation, coupled with earth movement and a severe weather cycle, caused the pipes to fail.
A jury found both FMC and Shell strictly liable, and found Shell liable for negligence. After finding the district 25 percent at fault, jurors hit Shell with a $5.1 million verdict and FMC with $1.5 million.
The jury's verdict covers damages incurred before 1999, including roughly 6,600 burst pipes. Since then, an equal number of pipes have burst in the district, Fogel said. The district has started a replacement program for polybutylene pipes still underground, he said.
The appeals court upheld the jury's verdict, saying substantial evidence supports their conclusion that the risks of the pipe design outweighed the benefit. Shell just ignored such evidence in its appeal, the court wrote.
Justice Paul R. Haerle wrote for the panel. He was joined by Justices Anthony J. Kline and Ignazio Ruvolo. East Bay Municipal Utility District v. FMC Corp., A091017.
The court also rejected Shell's contention that the district can't recover because it is a sophisticated commercial user. To use this defense, Shell needed to show that the district and the company were of relatively equal economic strength, the appellate court said. Shell denied itself this defense by successfully excluding all evidence of its financial condition at trial, the court said.
The pipes were installed throughout the country from the late 1960s to the early 1990s. Manufacturers' liability is limited by a nationwide class action, filed in a Tennessee Chancery Court, that was settled for $950 million. Cox v. Shell Oil Co., 18844. The settlement covers only certain types of pipes installed between 1978 and 1995.
David Devendorf Ring, of San Francisco's Fabris Burgess & Ring, represented Shell on appeal. John D. Dwyer, of Los Angeles' Seyfarth & Shaw, represented FMC. Neither attorney returned phone calls Wednesday.
Cameron Smyth, a spokesman for Shell, said he had not seen the opinion and declined to comment.