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    June 05, 2012 Articles

    The Rise of Fracking and Associated Litigation

    Production companies hoping to avoid lengthy and costly discovery proceedings must understand plaintiffs' pleading requirements to survive motions to dismiss.

    By James Eimers and Liz Klingensmith – June 5, 2012

    Although the technology has been in existence commercially for more than 60 years, hydraulic fracturing—or “fracking”—has only recently taken center stage in the increased production of natural gas in fields around the United States. Paired with horizontal drilling, fracking has allowed production companies to extract large quantities of previously unrecoverable gas in tight shale and coal bed formations. The process itself consists of pumping a mixture of fluid and propping agents—such as sand or ceramic pellets—into a well at high pressures sufficient to expand existing or create new cracks in the formation. The granular proppants subsequently hold these cracks open and permit the additional flow and production of gas. With the widely increased implementation of fracking over the last decade, natural gas reserves have grown to record highs, while natural gas prices have fallen concomitantly.

    Despite the fact that fracking has exponentially increased the production potential of natural gas within U.S. borders, the process is not without vocal opponents. In addition to certain legislators and environmental groups, individuals leasing property to oil and gas companies have alleged that fracking can cause serious health, environmental, and property harms. Indeed, as fracking operations have become more prevalent, landowners in various federal districts have begun to file lawsuits against company leaseholders. Although not factually identical, these suits typically allege that fracking and other general drilling operations have contaminated groundwater and soil, and polluted the air and atmosphere.

    As the specter of litigation grows with the expansion of fracking operations, production companies hoping to avoid lengthy and costly discovery proceedings must understand plaintiffs’ pleading requirements to survive motions to dismiss. The relevant standard for such motions is Federal Rule of Civil Procedure 12(b)(6), which permits dismissal of complaints for failure to state a claim upon which relief can be granted. The universe of cases arising from alleged fracking contamination remains nascent. However, a survey of several recent federal cases—three of which survived dismissal motions with no repleading necessary, one of which did not—potentially clarifies the level of specificity to which plaintiffs’ allegations must rise if their complaints are to survive 12(b)(6) motions and continue to discovery.

    Federal Pleading Standards under Twombly and Iqbal
    In two recent decisions, the U.S. Supreme Court articulated and subsequently formalized a two-pronged approach to determine whether a complaint is sufficiently formed to avoid dismissal under 12(b)(6). Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal, 556 U.S. 662 (2009).

    Under the pleading requirements of Federal Rule 8(a), a complaint must contain a short and plain statement of the claim showing that the pleader is entitled to relief, “in order to give the defendant fair notice of what the claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Thus, to survive a motion to dismiss, a complaint must allege “enough facts to state a claim to relief that is plausible on its face.” Id. at 570.

    To satisfy this plausibility standard, plaintiffs must allege facts that surpass pure possibility. “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). Conclusory recitations of the elements of a cause of action will not suffice. “Rule 8 marks a notable and generous departure from the hypertechnical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Id. at 678–79.

    In assessing the merits of a claim facing dismissal, then, a district court must first identify pleadings that constitute nothing more than legal conclusions; such conclusory statements receive no presumption of truth, and are disregarded. Second, the court must identify the “well-pleaded, factual allegations.” Id. at 679. Assuming the veracity of these factual allegations, the court then determines whether “they plausibly give rise to an entitlement to relief.” Id.

    Motions to Dismiss in Recent Fracking Cases
    Severalrecent contamination-related complaints filed against production companies reveal how courts have begun to apply federal pleading requirements in the fracking context. One such complaint—ordered amended after being ruled largely conclusory—helps define the contours of the plausibility standard in fracking pleadings. Tucker v. Southwestern Energy Co., 2012 U.S. Dist. LEXIS 20697 (E.D. Ark. 2012). Similarly, those complaints at least partially surviving 12(b)(6) dismissal motions identify the level of pleading specificity required to open the door to discovery. Fiorentino v. Cabot Oil & Gas Corp., 750 F.Supp.2d 506 (M.D. Pa. 2010); Hagy v. Equitable Prod. Co., 2011WL 1627920 (S.D.W. Va. 2011);Berish v. Southwestern Energy Prod. Co., 763 F.Supp.2d 702 (M.D. Pa. 2011).

    Tucker
    One recent complaint that initially failed to reach discovery underscores the importance of pleading allegations that rise above mere conclusion. In Tucker, a group of landowners sued several production companies carrying out fracking operations on gas wells in close proximity to the landowners’ homes. Alleging water and soil contamination and air pollution, the Tucker plaintiffs asserted claims for nuisance, trespass, negligence, and strict liability.

    In support of their claims, the Tucker plaintiffs pleaded facts that focus on fracking operations generally—not those operations used specifically by the defendants. The plaintiffs alleged that fracking is “known to cause migration of ‘fracking fluids’ as well as methane and other noxious gases. . . .” They further asserted that such general fracking migration is responsible for soil and water contamination of properties within three miles of the gas wells in question.

    The complaint, however, failed to indicate what actions or inactions on the part of the defendants could plausibly have caused such a migration and subsequent contamination. When ruling on a motion to dismiss, the district court focused on this pleading failure in finding the complaint largely conclusory and thus insufficient to rise to plausibility for any of the asserted claims:

    These complaints are mostly conclusions and general statements. There are only a few facts pleaded with any specificity.

    Missing are particular facts about particular fracking operations by particular companies using particular substances that allegedly caused [the contamination]. General statements about the many dangerous substances used in fracking, and conclusory statements about the migration of those substances, will not suffice. For their claims to be plausible in the strong sense recently dictated by the Supreme Court, the [Plaintiffs] must plead more facts linking each company’s operations with the particular harm alleged.

    At a minimum, however, the [Plaintiffs] must allege more than that fracking fluids are dangerous, migratory animals. This is a conclusion.”

    Ultimately, the court ruled that the fix for the complaint “is not dismissal at this point,” and ordered the plaintiffs to amend their original complaint with greater specificity and further factual allegation.

    Hagy, Berish, and Fiorentino
    Where the original complaint in Tucker fell short on all asserted claims, three other recent pleadings have met with greater success when facing motions to dismiss.

    Hagy and Berish
    Although quite similar to Tucker in general form and asserted causes of action, the complaints in Hagy and Berish offer a significant difference that appears to have saved them from complete dismissal or an order to file amended pleadings: a specific theory as to how the defendants’ fracking activities could plausibly have led to water contamination via migration of fracking fluids and chemicals.

    In Berish, the plaintiffs asserted that “the release and discharge of contaminants were the result of improper or insufficient cement casing of Defendant’s Price #1 Well located near Plaintiffs’ homes.” Similarly, in Hagy, the plaintiffs alleged that “the release and discharged [sic] of contaminates were the result of improper or insufficient cement casing of the gas wells located near Plaintiffs’ homes.”

    Such an allegation, noticeably absent from the Tucker complaint, offers the specificity required to elevate claims from possible to plausible. Indeed, in denying in part a motion to dismiss certain causes in Berish, the district court highlighted the casing allegation in its review of the facts: “As a result of Price #1 Well’s insufficient casing, pollutants and other industrial waste, including the fracking fluid and other hazardous chemicals such as barium and strontium, were discharged into the ground and contaminated the water supply.”

    Additionally, both complaints alleged specific contaminants released through the defendants’ spills and use of insufficient casing. This identification of a specific means of contamination, taken together with the specific form of the contamination, appears sufficient to carry certain causes of action to discovery.

    Fiorentino
    A final recent complaint surviving in whole a 12(b)(6) motion to dismiss demonstrates the importance of robust factual specificity in the pleadings of fracking actions. In Fiorentino, the plaintiffs alleged that production companies operating nearby gas wells improperly conducted fracking and drilling operations, leading to the contamination of landowners’ groundwater and land. The defendants moved to dismiss the causes of strict liability, gross negligence, and medical monitoring. The defendants additionally moved to dismiss a claim stemming from the Hazardous Sites Cleanup Act (HSCA).

    The Fiorentino complaint stands out among the others discussed in this article as the most factually robust. Indeed, in addition to asserting the dangers of fracking operations more generally (itself insufficient in Tucker), the complaint further detailed specific behavior on the part of the defendants that could plausibly have caused the alleged contamination. As did those in the Hagy and Berish complaints, the Fiorentino plaintiffs alleged that the defendants improperly cased the wells in question. Additionally, the complaint identified several specific, potentially contaminating actions on the part of the defendants:

    Diesel fuel was caused to be spilled on the ground near Plaintiffs’ homes and water wells; drilling mud was caused or allowed to be discharged into diversion ditches near Plaintiffs’ homes and water wells; and three significant spills of pollutants were caused to occur within the Dimcock Gas Well Area within a ten day period.

    In light of the complaint’s well-formed allegations, the district court denied the defendants’ motion to dismiss in its entirety. When addressing the dismissal motion against the HSCA claim, the court noted, “[T]he complaint alleges in detail that Defendants were responsible for causing to release hazardous substances, that Defendants failed to take necessary steps to remedy contaminated water supplies, and that Plaintiffs have become physically sick and ill in a manner that could continue.” The court also noted the sufficiency of the plaintiffs’ specific allegations of spills and discharges when it denied the motion to dismiss the claim for medical monitoring.

    Conclusion
    Although case law surrounding fracking contamination claims remains in its early stages, several recent rulings on motions to dismiss have begun to give shape to the pleading requirements for such cases to make discovery. To satisfy the Rule 8 interpretations ofTwombly and Iqbal, landowners must go beyond bare assertions that fracking operations are generally dangerous and therefore causally linked to any contamination that might arise within their proximity. Indeed, it appears that the plaintiffs in Tucker have taken note of the more successful complaints filed in Hagy, Berish, and Fiorentino. Among other new allegations in their amended pleading, the Tucker plaintiffs assert that the specific chemical contaminating their water supply was used by the defendants in fracking wells located half a mile from the plaintiffs’ home. They also assert that the liner on the reserve pit used to store the fracking fluid above ground was eroded and contained holes allowing the fluid to migrate onto surrounding land. If the dismissal rulings in the more successful complaints discussed here are any indication, at least some of the amended Tucker causes will likely survive to discovery.

     

    Keywords: litigation, energy litigation, fracking, fracking litigation, Iqbal, Twombly, pleading, motion to dismiss

     

    James Eimers and Liz Klingensmith are with Haynes and Boone, LLP in Houston, Texas.

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