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Spring 2005-12 Landmark local environmental penalty claim In jeopardy

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Number 59
Spring 2005

Landmark local environmental penalty claim: In jeopardy?

Expert's report stricken by court due to exorbitant feeSince the Environmental Quality Board levied a proposed $75,960,000 fine on Esso Standard Oil Company, in May 2001, its propriety has been the basis of several actions in both state and federal courts.

The penalty imposed on Esso was based on the company's failure to notify the EQB promptly of a fuel release from a pre-991 underground storage system at a service station in the town of Barranquitas, and to remedy that release. The hefty fine, 5,000 times greater than the largest fine ever imposed by the EQB under its underground tank regulation, is undoubtedly one of the largest in the history of the EQB, and represents twice the agency's operating budget. Not surprisingly, the penalty continues to be a hotly debated subject in the local and federal court systems.

Court of Appeals

Late last year, the U.S. Court of Appeals for the First Circuit upheld the dismissal of the oil company's lawsuit seeking to enjoin the EQB from imposing the multimillion dollar fine. Esso Standard Oil Co. v. Cotto, 34 ELR 20139 (1st Cir. 2004). Esso had alleged that the members of EQB board were so biased that their adjudication of the case constituted a violation of the Due Process Clause of the U.S. Constitution. The court affirmed the District Court's decision denying Esso's motion. The Court of Appeals reasoned that because administrative proceedings are ongoing before EQB board, the District Court properly abstained from the company's suit. Although the board may be biased against the company, Esso failed to demonstrate irreparable harm, therefore precluding federal intervention at this time. Moreover, the Court of Appeals indicated that a due process claim may still be brought by Esso before the state courts.

Expert's report

Most recently, the District Court granted Esso's motion to strike a report submitted by the co-defendant service station owner's expert witness, and denied the co-defendant's motion for reconsideration of the court's previous summary judgement decision concerning liability for response costs Esso incurred cleaning up environmental contamination at the Barranquitas site. Esso Standard Oil Co. v. Pérez, 35 ELR 20020 (D.P.R. 2005). The court reached its decision to strike the expert report based on a failure to comply with Federal Rule of Civil Procedure 26(a)(2)(B) and because of the witness' attempt to extort from the oil company an exorbitant amount in exchange for his testimony at the deposition. Additionally, the affected party is precluded from calling the expert to testify at trial. Given the importance of expert testimony in environmental pollution cases such as this, it remains to be seen what effect the decision to preclude the co-defendants's witness will have on the final outcome of the case and the appropriateness of the landmark penalty being proposed by EQB.


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