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Courthouse News Service Courthouse News Service

Shell Close to $90M Payout for SoCal Neighborhood

LOS ANGELES (CN) - A state court judge looks set to approve a $90 million settlement with residents of a Carson neighborhood sitting on top of a sludge of petroleum waste, pending a final objection from the oil giant's developer co-defendant in the case.

Five years ago, residents of the Carousel neighborhood of Carson - 17 miles south of downtown L.A. - sued Shell Oil and real estate developer Barclay Hollander, with the support of high-profile environmental activist Erin Brockovich. Barclay is owned by multinational Dole Food Company.

The suit alleged the oil giant knew that hundreds of family homes would be built above three underground tanks when, in the late 1960s, it transferred part of the site to the developer.

In 2009, Shell discovered that oil and carcinogenic chemicals had leaked into soil beneath the residential area that 1,491 people call home.

On Thursday afternoon, Superior Court Judge William F. Highberger did not make a final ruling on Shell's motion for a good-faith determination of the settlement agreement.

But the judge looks set to reject Barclay Hollander's contention that it could be left holding the bag if the court approves the agreement.

Highberger said at the hearing that in order to "dot my Is and cross my Ts," he would allow the developer defendants to depose environmental attorney William E. Platt, who supported Shell's good-faith determination.

Barclay will then get to file one more opposition to Shell's motion. The oil company may then "file their last, best factual showing in support of grant of the motion," before Highberger rules on Jan. 30, a tentative order obtained by Courthouse News states.

Highberger noted in his order that the proposed settlement is "'in the ballpark' for the purposes of showing good faith," giving an indication of how he intends to rule.

According to the tentative order, the proposed settlement includes allocations for economic and noneconomic property damages, and economic and noneconomic personal injury damages.

The plaintiffs' lawyer, Tom Girardi, told Courthouse News shortly after the hearing that it was a "given" that the judge would approve the settlement.

"What judge out there is going to turn down that kind of money for these people?" Girardi said.

Still, the finer print of the oil giant's settlement has remained fuzzy. Late last year, Highberger agreed to issue an interim protective order that keeps the agreement under wraps, after Shell threatened to pull out unless the deal remained confidential.

Even though Shell also proposed a $146 million agreement to clean up the neighborhood this past November, some residents told Courthouse News on condition of anonymity that the firm Girardi Keese was pressuring them to sign waivers that absolve Shell of any liability.

After the hearing Girardi pushed back against the notion that his firm had used any underhand tactics.

"We know what we're doing," Girardi said. "And other than a handful of five or six, [the plaintiffs] are very happy. We get notes every day that appreciate our working so hard for them, the progress that we've made with respect to getting the place cleaned up - the progress we've made with respect to monetary compensation. All these people are the sweetest clients we've ever represented."

Girardi conceded that a few residents were unhappy with the settlement, but said that all of the plaintiffs had signed off on the deal.


"Whenever you have a group like this, you're always going to have some that indeed were upset about it," Girardi said. "On the other hand, they all signed off on it because they realize that the only way for them to partake in this terrific deal is to join the club."

Girardi was one of the lawyers who represented the residents of Hinkley, Calif., in the chromium-6 case made famous by the 2000 movie "Erin Brockovich" starring Julia Roberts.

Some people in the community said they worried that they could face the same fate as the residents in Hinkley, who despite the Hollywood ending depicted in director Steven Soderbergh's Academy-Award winning movie, reportedly felt shortchanged by the arbitration process.

The roots of the current dispute can be traced back to decades ago, after Shell acquired a German settlement called the Kast site in Carson.

Shell operated an oil refinery in the area from 1922 until 1967, when it transferred part of the Kast site to developers. Shell kept subsurface rights 500 feet underground, according to court records.

At some point, the three underground tanks and drainage fields that had been connected to the Shell oil refinery began to leak oil and chemicals - turning a once-appealing neighborhood into a place where hundreds of homes sit atop 161,700 cubic yards of toxic sludge.

Ultra-hazardous chemicals were found in the soil, including methane and benzene, which have been linked to melanoma and lymphoma.

For some residents of Carousel, the impact on their health and community has been obvious. Pets have had tumors; residents have been diagnosed with cancer and blood disorders. Oil deposits have seeped into homes, and parents have taken to warning their children not to go outside and play in the grass.

Through all that, Shell has maintained that the risks to those living in the area are minimal.

"They're disgusting. Despicable. There will be no settlement. We want a jury to look at this," Girardi said of Shell, according to the Daily Breeze this past March.

But by November, FedEx trucks descended on the neighborhood, delivering packets from the law firm to residents containing waivers for the $90 million settlement.

That's roughly $60,000 for each resident, though arbitrator Judge Edward A. Panelli will measure compensation for each individual against health and property damages.

Girardi said the costs of litigating were about $8 million. He estimated that legal fees would amount to about a "buck an hour."

He also denied that his March 2014 comments were directed at Shell.

"Oh, no, no, no," the attorney said. "I'm determined to get the developer in court. Cross my heart and hope to die."

He added: "Shell contaminated the property. They sold it to the developer. We have an agreement that says on the sale of the property, 'We are selling this for $1 million, it's worth 20 times that but it's contaminated.'"

Girardi said that the developer had agreed to clean up the site before building the homes.

"Then they're in court like this, raising Cain that Shell's going to get the money," Girardi said of Barclay. "They're the most miserable, rotten, despicable defendant I've had a case against."

Shell also entered into an agreement with the California water quality control board to spend $140 million to clean up the 50-acre neighborhood. That's in addition to the $40 million Shell has already spent remediating the property.

But for some people who live in Carousel, the settlement does not go far enough. Some said they wanted Shell to buy their properties so they could leave. For others, the cleanup plan has not allayed their fears that they could get sick after the deal is done.

Water board representatives at a meeting on Nov. 18 to discuss the cleanup plan largely batted away questions related to illnesses - even after a resident complained that her water smelled like rotten eggs, and another asked what would happen if she got sick in the future.

Under the proposed cleanup plan, Shell will remove contaminated soil to 5 feet deep from 207 homes and to 10 feet from another 85 properties. In addition to replacing what it removes with clean soil, Shell will install a venting system at homes and in streets to disperse toxic fumes and will continue to monitor and remove oil from groundwater.

But there is no plan to remove the underground storage tanks.

Some residents likened the cleanup to a glorified landscaping job. Others noted that there was no contingency when an earthquake strikes.

A proposed "Optional Real Estate Program" will allow residents to sell their homes if they want to move. Shell has agreed to pay the difference if homeowners sell at less than fair market value. But the plan does not make clear what will happen if a resident places their home on the market and there are no buyers.

Neither Shell attorney David L. Schrader, of Morgan, Lewis & Bockius, nor the Regional Quality Control Board in Los Angeles immediately responded to requests for comment.

Girardi Keese initially planned to answer questions and have residents sign waivers on Nov. 19, 2014, at the Doubletree Hotel in Carson. Close to 500 people showed up, with the line to enter the hotel stretching far around the hotel.

The planned event soon descended into chaos when it became clear that the small meeting room the firm had reserved would not accommodate the hundreds of residents lining up outside. The fire marshal was called and the firm postponed the meeting.

Days later, residents received robo-calls breaking up the residents into small groups over three days of meetings at the Doubletree from Nov. 21 to Nov. 23. Courthouse News was denied access to a Sunday meeting at the hotel.

"The literature we received, they're asking for waivers to be signed without anything else," one resident who asked not to be named told Courthouse News at the Doubletree on Nov. 19. "Shell Oil is asking for access to your property forever. Then they're asking us to sign a waiver releasing Shell of all liabilities for anything that's unforeseen in the repair on the property."

He added: "Nobody is saying 'If you get sick later, we're going to cover it.' After the money is dispersed, there is no more money."

The man called Shell's cleanup plan "terrible."

"They have the right to come into your house and do whatever, anytime they want," he said.

He added that he had no desire to move from Carousel, despite the community's problems.

"We have the greatest neighbors around. The community is so tight. We've all come to love our houses. We want to stay. I love my neighbors," he said.

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