Chevron May Duck Suit Over Blaze in Nigeria

(CN) - A federal judge refused to let Nigerians advance a $5 billion complaint over a weeks-long oil rig blaze that Chevron allegedly failed to address, despite its harm to residents and the environment.

Hoping to represent the estimated 65,000 residents of the Niger Delta region of southern Nigeria, Dr. Foster Ogala and others sued the energy giant in San Francisco earlier this year.

They claimed that the KS Endeavor, an offshore natural gas rig drilling in North Apoi Field, exploded on Jan. 16, 2012, causing a fire that burned for 46 days.

Ogala and the other residents said they were "directly affected by, interested in and having claims arising out of the incident," and suffered "losses to their livelihood, environmental damage, and health problems as a result of the explosion and fire," according to U.S. District Judge Samuel Conti's summary of the case Monday.

Ogala said KS Drilling negligently operated by KS Endeavor under the management of Chevron Nigeria Limited (CNL).

Chevron Corp., Chevron Investments and Chevron U.S.A. (CUSA) were named as defendants, but not Chevron Nigeria Ltd., a wholly owned subsidiary of Chevron Investments.

Conti found Monday that the plaintiffs failed to state claims against the defendant companies as alter egos of Chevron Nigeria Ltd.

The plaintiffs failed to "claim anywhere in the complaint to represent a class," Conti said, dismissing any claims on behalf of unnamed nonparties.

"Plaintiffs claim that defendants are liable for CNL's actions," the 16-page ruling states. "However, '[i]t is a general principle of corporate law deeply ingrained in our economic and legal systems that a parent corporation ... is not liable for the acts of its subsidiaries.'"

Though the plaintiffs made "sound factual allegations," Conti said, they added "a number of remarkably convoluted disjunctive accusations."

"For example, plaintiffs allege that 'Chevron Corp. and/or Chevron Investments, and/or CUSA commissioned the acts complained of and/or authorized CNL in the commission of the acts alleged herein, and/or ratified the acts of CNL alleged herein,'" the ruling states. "While a simpler version of that sentence might be classified as a factual allegation, plaintiffs include so many alternative options that it is impossible to determine exactly what is alleged or which parties are allegedly responsible for it."

Conti also found the plaintiffs failed to cite property damage and personal injury specifics, or how alleged damage or injuries resulted from the defendants' conduct.

"There is no discussion whatsoever of how a fire on an offshore rig damaged the businesses, livelihoods, property, or health of Dr. Ogala or any of the other plaintiffs in this case," the ruling states. "Plaintiffs make claims about damage to fish, livestock, contamination of water and soil, and 'general health breakdown.' But there are no allegations that the damaged livestock belonged to plaintiffs, that the plaintiffs' livelihoods depended on fisheries, that the contaminated water or soil harmed them or their property, or that the 'general health breakdown' affected them. As for the claims of property damage and physical injury, there are no allegations that the fire ever spread from the KS Endeavor. Plaintiffs need to allege facts that make their damages claims plausible; in this case, they need facts that indicate how the fire actually harmed them."

Though the plaintiffs failed to state that they owned "any land at all," they asked for $5 billion in damages, according to the ruling.

Chevron countered that the plaintiffs could not aggregate claims to reach a $75,000 threshold, and that $75,000 per plaintiff was an "implausible" damages estimate because the gross domestic product per capita in the Niger Delta was $2,544.

"Ultimately, the court cannot assess the reasonableness of plaintiffs' damages estimates because of the lack of specificity in their complaint," Conti said. "Due to that defect in the pleadings, and the fact that the court dismisses this action on other grounds, the court declines to rule on the amount-in-controversy issue at this time."

The plaintiffs have 30 days to file an amended complaint.

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