Watson v. Shell Oil Co.

Sixteen employees of Shell Oil Company (Shell) and thousands of Norco, Louisiana residents (claimants) (plaintiffs) filed class-action lawsuits against Shell and Brown & Root, U.S.A. (Brown & Root) (defendants) for damages the claimants sustained when a pipe elbow failed at Shell’s Norco manufacturing facility, resulting in an explosion that damaged the facility and the surrounding communities. The lawsuits were consolidated and certified as a class action under Federal Rule of Civil Procedure 23(b)(3), and the claimants were divided into subclasses under Rule 23(c)(4). Subclass A included thousands of resident claimants, and Subclass B included Shell employee claimants. The district court also ordered a four-phase trial plan. In Phase 1, a jury would determine liability for compensatory and punitive damages. If the jury determined that punitive damages were warranted, Phase 2 would occur, in which 20 sample cases would be fully tried to determine compensatory damages and then to determine the ratio of punitive damages to compensatory damages for each class member. Phase 3 would be used to resolve each claimant’s unique issues, and in Phase 4, the district court would compute punitive damages for claimants awarded compensatory damages. Shell moved for interlocutory appeal to oppose the trial plan. Shell argued that the Phase 2 sample case trials violated the holding in In re Fibreboard Corp., which disallowed a sample trials scheme because the scheme did not require all plaintiffs to prove causation and damages and because the sample trials would establish damages for widely varying injuries based on statistical profile and thus were not true trials. Shell also argued that Phase 2 violated due-process rights and the requirement that punitive damages be reasonably related to compensatory damages. Brown & Root opposed class certification for failure to meet Rule 23 requirements.