Archive for June, 2011

In 1988, BNSF Railway and Union Pacific Railroad sold their interest in a parcel of land in Stockton, California, to the city’s redevelopment agency. That agency then sold a portion to a commercial developer who discovered that the soil and groundwater had long been contaminated. Officials determined that (1) a nearby petroleum facility was source of the pollutants and (2) several spills in the 1970s had sent petroleum onto the property through an underground drain. Under its agreement with the developer, Stockton’s redevelopment agency spent nearly $2 million cleaning the site.

In 2005, the agency sued the railroads for reimbursement, claiming they were liable for the contamination under common-nuisance law and California’s Polanco Redevelopment Act, which governs the rehabilitation of former industrial sites throughout the state. The trial court agreed and awarded the agency more than $800,000 in damages and an injunction, holding that the railroads were liable for the contamination because they installed the underground drain through which the contaminants migrated onto the property. The trial court found that, had the railroads not installed the drain, the land would not have been damaged.

On appeal, the Ninth Circuit Court of Appeals rejected the trial court’s decision, noting that no precedent allowed but-for causation to establish nuisance liability:

We cannot agree that such passive but-for causation is sufficient for nuisance liability to attach. Under California law, conduct cannot be said to “create” a nuisance unless it more actively or knowingly generates or permits the specific nuisance condition.

The court then remanded the case back to the trial court for entry of summary judgment for the railroads.

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In 2004, Mercatus Group partnered with Evanston Northwestern Healthcare to open a physician center in the village of Lake Bluff, a short distance away from the almost 70-year-old Lake Forest Hospital. Recognizing the threat a competing facility would pose, Lake Forest Hospital began a lobbying and public-relations campaign to prevent the center’s launch. The hospital directly lobbied the village board and community members and offered incentives to keep physician-practice groups from leaving the hospital to join the new center. After the village board refused to rezone the land for medical use, the physicians stayed at the hospital, killing the Mercatus center. Mercatus then sued the hospital, alleging anti-competitive practices under the Sherman Act. The trial court found that the hospital’s efforts were constitutionally protected speech and granted summary judgment to the hospital.

On appeal, Mercatus argued that the hospital made misrepresentations to the board, the public, and the physicians it pulled away from the center and that those misrepresentations negated constitutional protection. The Seventh Circuit Court of Appeals rejected the arguments, noting antitrust litigation "’cannot be used to chill [the] constitutional right’ to ‘petition without fear of sanctions.’" The court further stated the following:

To make such injuries from public relations campaigns actionable under the antitrust laws would ‘be tantamount to outlawing all such campaigns.

Finally, the court explained that, though the hospital allegedly lied to physicians that Mercatus had violated certain anti-kickback regulations, antitrust laws do not prohibit "conduct that is only unfair, impolite, or unethical.” Accordingly, the court affirmed the trial court’s decision.

For the full story, click here.

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