RICHMOND, Calif. (Legal Newsline) – Without Chevron, the California city of Richmond wouldn’t exist as it does today. But even though the company is sustaining Richmond's current economy, city officials claim it is also destroying the future.
It’s a complicated dynamic as the city uses private lawyers to (again) sue its largest employer – a company that provides about one-third of Richmond’s budget. In 2016, the company paid $45 million in taxes while the city pursued a legal theory that it was owed more property taxes than what Chevron paid - because a 2012 fire had hurt the refinery's value.
The economic impact Chevron has on the city can’t be understated. However, some city leaders openly detest the company, and they want more than just tax revenue. It’s anyone’s guess what a verdict against Chevron and its fellow fossil fuel giants in this latest lawsuit would cost, but it surely wouldn’t be cheap.
Three paint companies also sued in California under a public nuisance theory are facing a multibillion-dollar judgment – and that’s just over the presence of lead paint, not the destruction of coastal communities.
Lawsuits filed by Richmond and a group of other California cities and counties say a catastrophic flooding event is coming because of the climate change caused by the energy industry. Chevron is one of many defendants and scoffed at that allegation in a December court filing, arguing that everyone would be an offender then – even a city that takes its money and uses its products.
A finding of liability on the part of Chevron also would implicate plaintiffs, private entities "and individuals around the world who actually consume and burn the fossil fuels that Plaintiffs allege give rise to global warming and the sea-level rise of which Plaintiffs complain,” the company wrote.
Chevron’s plant, which was opened in 1902 by Standard Oil, actually predates the City of Richmond by three years.
The company declined an interview request to discuss its relationship with the city, but on its website is a 2013 report by Beacon Economics that details the impact its operations have in Richmond.
From 2009-12, Chevron spent $288 million on goods and services in Richmond, generating $370 million in economic activity and more than $120 million in wages and earnings, the report says.
The analysis found that Chevron’s spending in the City of Richmond supports 1,739 jobs at businesses throughout Richmond directly, with many of those jobs in the construction industry.
“This is a benefit to the many workers in lower-wage industries, such as construction, that were badly hit by the recession,” the report says.
The company even prints a newsletter focusing on its relationship with Richmond. Before it was sued by the City, the company wrote, “Chevron is committed to supporting the economic development of the Richmond community.”
The Richmond community, though, has a vocal faction that would rather the company drastically change its operations or leave town. One of its leaders is Gayle McLaughlin, a former mayor and current city councilor who is running for state lieutenant governor this year.
When McLaughlin was elected in 2006, Richmond became the largest U.S. city with a member of the Green Party as mayor. Her campaign website has a section titled “Stop Chevron!”
Chevron is a “bully” and a “predatory corporation,” she says. “(W)e are victims of a century-old refinery that pollutes even on the best days.”
In 2012, the refinery had one of its worst days. It caught on fire thanks to a corroded pipe, producing a massive black cloud.
“It’s our plight in Chevron – our collective plight being in the shadow of this big refinery that binds us,” she said after.
So, the city (and its residents) sued Chevron, as the company paid millions of dollars to cover the medical expenses of approximately 15,000 people who sought medical treatment. Chevron settled with state regulators, but Richmond’s lawsuit drags on into a fifth year.
In fact, Judge Barry Goode, of the Contra Costa County Superior Court, on Feb. 21 ruled on three Chevron motions for summary judgment. First, Chevron argued that it should face no claim alleging Richmond suffered losses in tax revenue because of a decrease in the property value of the refinery. Goode agreed.
“The City cannot be said to have a legally protected interest in any amount other than that which is provided by the relevant property tax laws,” he wrote. “That amount is based on the property’s actual assessed value; not what the value would have been had there been no fire.”
Second, the company claimed a cause of action for ultrahazardous activity failed. Goode ruled Richmond offered no evidence to dispute Chevron’s use of carbon steel piping and has failed to create a factual dispute.
Applying a six-factor test, Goode ruled for Chevron – “The City does not offer any evidence that the refinery’s normal operation poses a high risk of serious harm,” he wrote.
Finally, he ruled that Richmond can continue pressing its nuisance claim.
Representing Richmond in the fire case is the politically active Burlingame firm Cotchett, Pitre & McCarthy, which is also a part of the litigation team pushing the public nuisance case against the paint industry.
Cotchett Pitre, in 2012, signed on to represent Richmond on a contingency fee in litigation alleging LIBOR interest rates were manipulated through a conspiracy.
Sher Edling is the main firm handling the climate change litigation. Other California cities and counties have hired Hagens Berman. The city denied an open records request for communication between it and Sher Edling, claiming it is protected by attorney-client privilege.
Oakland responded to a similar request with a copy of its retainer agreement that stipulates private attorneys will make 23.5 percent of its recovery.
Richmond's contract with Sher Edling puts the firm in position to recover 25 percent from the net recovery up to $100 million, with a tier system decreases that amount as recovery grows.
For recovery between $100 million-$150 million, the firm will get 15 percent. For recovery greater than $150 million, the firm gets 7.5 percent.
Chevron's and Richmond's lawyers are currently fighting over whether the case should be heard in federal or state court. Given California’s reputation, Chevron is hoping federal jurisdiction prevails.
Chevron has added Norwegian-owned Statoil as a third-party defendant in other cases, likely hoping to invoke federal jurisdiction.
As the city rejects the company that helped build it, it’s fair to wonder what message is being sent to other businesses interested in the area.
James Lee, the president of the Richmond Chamber of Commerce who also serves on the city’s Economic Development Commission, noted that Amazon leased a warehouse in the city in 2016.
Lee also says he doesn’t believe this will stop small businesses from coming to the city.
“But I do believe it could potentially stop bigger businesses from wanting to make Richmond their home,” Lee said.
“Would they reconsider, knowing the city is suing the business that claims the biggest tax revenue for the city? I’m not sure. That could potentially happen, but that’s all speculation because I have no data to prove one or the other.”
From Legal Newsline: Reach editor John O’Brien at john.obrien@therecordinc.com.