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Wednesday, June 12, 2024 | Back issues
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Landowner’s award for illegal underground oil pipelines knocked back

The judge threw out one $6 million award leveled against one oil company, and trimmed another award against Shell oil down to $30 million.

(CN) — A federal judge reduced a jury's award to a property company that sued Shell oil and another petroleum company over an illegal pipeline underneath its property in Bakersfield, after finding that the jury incorrectly calculated damages based on the benefits they received.

After a ten-day trial, a jury awarded C&C Properties, a developer and management company, just under $40 million — $33 million from Shell, and $6 million from Alon Bakersfield.

But the Ninth U.S. Circuit Court of Appeals later ruled that the award against Alon was "methodologically flawed," and that the jury incorrectly tallied up the damage done by Shell using the date C&C purchased the land as a starting point.

The appellate court remanded the verdict back to U.S. District Court Judge Lee Rosenthal, who, on Wednesday, threw out the verdict against Alon altogether, and trimmed back the award against Shell by $3 million.

"We all hope this will bring an end to the journey they have been on since judgment was first entered in June 2019," said C&C Properties attorney Tom Vogele in an email.

C&C purchased a parcel of land in Bakersfield in October 2013, which it intended to turn into an office complex. Months later, it discovered there were unrecorded gas and oil pipelines underneath the property. The company sent letters out to Shell and Avon, demanding they remove the pipelines within 60 days, giving them until October 2014. A month later, C&C sued. Eventually, the pipelines were removed, though not until December 2015.

The jury based its awards on the benefits the two companies received from their pipelines. Both companies filed motions for a new trial. Alon argued that no evidence had been presented at trial that it had obtained $6 million in benefits, and that damages should be reduced $204,000, the amount of money Alon saved by not using a different pipeline. Shell argued that its award was "legally excessive." Both motions were denied by Rosenthal.

Alon and Shell appealed, and the Ninth Circuit panel ruled in their favor, vacating the denial, finding, "the district court erred when it allowed C&C to seek trespass damages retroactive to the date C&C acquired title.”

The damages should have been calculated starting October 2014, or 60 days after it sent its demand letter, the panel said. It also wrote, "The method of calculating Alon’s benefits obtained was deeply flawed."

Rather than reduce the award to a few hundred thousand dollars, Rosenthal decided to simply vacate it.

C&C had argued that the jury's award of $33 million from Shell, though less than the $54 million it had asked for, must have nonetheless been based on the oil company's gross revenues from October 2013 to December 2015. Shell argued that it had been based on its net profits — revenue minus expenses during that time — and that the award should be knocked back to $17 million.

Rosenthal admitted that the jury's thinking was a mystery, and went with the higher number of $30 million.

C&C can still file a motion for a new trial, if it wants to.

Attorneys for Shell and Alon did not respond to an email requesting a comment.

Follow @hillelaron
Categories / Appeals, Energy

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