Texas Supreme Court orders new trial in landowners’ natural gas lawsuit

by John Chapman

A lawsuit filed in 1998, tried to a jury in 2009, and appealed to the Supreme Court of Texas more than two years ago has finally resulted in a ruling … that the parties should start over at the trial court.

In 1992, the Natural Gas Pipeline Company of America built a compressor station in Lamar County. Soon thereafter, area residents began complaining to NGPC and to state regulators that the station’s noise, odor, and lights interfered with the enjoyment of their homes.

In 1998, twelve residents of the area sued NGPC alleging that the station’s noise and odor constituted either a temporary or permanent nuisance. A jury found that (1) the noise and odor from the station created a permanent nuisance, and (2) those conditions first created a nuisance on June 12, 1998, the date of the TCEQ citation. The jury determined that the nuisance affected only nine of the twelve plaintiffs and awarded $1,242,500 for their lost property value.

Statute of Limitations Did Not Bar Claims

A lawsuit for damages from a “permanent nuisance” must be filed within two years of the time when the condition first “substantially interferes with the use and enjoyment of land by causing unreasonable discomfort or annoyance to persons of ordinary sensibilities.” Because the plaintiffs had complained about the plant from the time it began operating in 1992, NGPC argued to the Texas Supreme Court that the lawsuit was filed too late and the claims should be barred. The Supreme Court disagreed because there was evidence to support the jury finding that the plant did not become a nuisance until June of 1998.

First, the Supreme Court pointed out that NGPC’s plant manager testified that he never noticed an odor that could give rise to a nuisance claim. Since “never” encompasses pre-1998, the testimony of NGPC’s plant manager was some evidence that no nuisance existed before 1998. In addition, the plaintiffs testified that the plant’s noise and odor escalated in 1997 and 1998. Consistent with that testimony, a postal worker testified that he asked his supervisors if he could discontinue his route to the location in the late 1990s because the plant’s odor became unbearable at that time. Finally, it was not until June 1998 that the State of Texas cited the station—issuing a Category 5 odor violation, the most severe possible, indicating overpowering, highly objectionable, and nausea- inducing odors.

The Court rejected NGPC’s argument that “that there would be no statute of limitations for permanent nuisance if a claim could be ‘revived’ by evidence that conditions worsened.” The court explained:

But we are dealing here with gradations. On one end of the scale, a nuisance can be established by a physical fact that is beyond dispute. If the nuisance consists of hazardous chemicals in the ground, the nuisance begins when the landowner knows or should have known that the chemicals were there. […] The result does not necessarily vary with the amount of chemicals. If the nuisance involves largely subjective criteria like smell and sound, however, the analysis is necessarily more fact dependent.

The point at which an odor moves from unpleasant to insufferable or when noise grows from annoying to intolerable “might be difficult to ascertain, but the practical judgment of an intelligent jury [is] equal to the task.” Merrill v. Taylor, 10 S.W. 532, 534 (Tex. 1888).

Both parties presented evidence to show when the nuisance began. The jury could have determined that the nuisance began in 1994, 1998, or never at all. The jury weighed the evidence and found that the claim accrued in 1998, and we agree with the court of appeals that legally sufficient evidence supports that finding.

Natural Gas Pipeline Company of America v. Justiss, No. 10-0451.

Landowners Failed to Prove Their Damages

If a nuisance is permanent, a landowner may recover the property’s lost market value. This normally requires a comparison of market value with and without the nuisance. The jury determined that the nuisance affected only nine of the twelve plaintiffs and awarded $1,242,500 for their lost property value.

At trial, the plaintiffs each testified regarding the damage to their own property value caused by the plant. The plaintiffs did not present evidence from any expert, such as a real estate appraiser.

Generally speaking, under Texas law, a property owner may testify to the value of his property. However, the Supreme Court held that “[b]ecause property owner testimony is the functional equivalent of expert testimony, it must be judged by the same standards.” Thus, an owner may not simply echo the phrase “market value” and state a number to substantiate his diminished value claim; he must provide the factual basis on which his opinion rests. According to the Court, evidence of price paid, nearby sales, tax valuations, appraisals, online resources, and any other relevant factors may be offered to support the claim. But the valuation must be substantiated; a naked assertion of “market value” is not enough.

Applying this standard to the evidence presented by the plaintiffs, the Court found the evidence insufficient to support the jury verdict.

Because the Supreme Court noted that the Plaintiffs may have been relying on a previous court decision in presenting their evidence on their properties’ diminution in value, the Court concluded that remand for a new trial was appropriate.

by John Chapman

John Chapman is a licensed attorney with experience in complex commercial litigation (including securities fraud, RICO, shareholder oppression, and derivative actions) and personal injury litigation.