Peruvians' Toxic Tort is Removed to State Court

Portfolio Media
Product Liability Law 360
by Erin Marie Daly, Portfolio Media, New York

A federal judge has agreed with a group of Peruvian children who were allegedly injured by exposure to toxins at a smelting plant in La Oroya, Peru, that their tort claims against the American companies who control the site should be removed from federal to state court.

In a memorandum and order handed down Tuesday, Judge Catherine Perry of the U.S. District Court for the Eastern District of Missouri said that the plaintiffs' claims arise under state law and therefore the federal court lacks subject matter jurisdiction.

The lawsuit was filed by 137 children who claim they were injured by exposure, as children or in utero, to lead and other substances released by a metallurgical complex in La Oroya, a town of approximately 30,000 in the foothills of the Andes mountains.

The pollution in the area is so severe, according to the plaintiffs, that the Blacksmith Institute, a New York-based nongovernmental organization that supports pollution-related environmental projects in developing countries, included La Oroya on its 2006 list of the world's 10 most polluted places.

According to court documents, the Peruvian government expropriated the multimetal smelter and refinery complex in 1973 and transferred it to the government-owned Empresa Minera Del Centro Del Peru SA, or Centromin.

Centromin operated the site for 23 years, until it contributed the assets of the plant to a different Peruvian company, Metaloroya, that was established to divest Peru of its equity in state-owned companies.

A third company, Doe Run Peru SRI, was then created to purchase the stock of Metaloroya in October 1997. The plaintiffs claim that the Missouri and New York corporations named as defendants in the suit are the real owners of the La Oroya complex and that Doe Run Peru is nothing more than a shell intended to shield these defendants from liability.

The U.S. corporations named as defendants are D.R. Acquisition Corp. and Renco Holdings Inc., as well as several of their individual officers and directors.

The plaintiffs say that a group of research scientists from the St. Louis University School of Public Health who have studied La Oroya have concluded that the conditions in the town constitute a public health crisis and that the pollutants emitted by the complex -- including lead, arsenic, mercury, and sulfur dioxide -- cause serious health risks for the people exposed to them, especially infants and young children.

According to the plaintiffs, these researchers have found that over 99% of children in La Oroya have blood lead levels exceeding the federal level of concern and that many of those children had levels that constitute a medical emergency.

In addition, the suit says, the arsenic content in the air of La Oroya is "at least six to eight times greater than levels that are considered highly dangerous internationally."

However, even though technologies and processes exist to prevent this pollution, the defendants have not implemented such procedures, the plaintiffs claim.

The plaintiffs' complaint asserts no claims under federal law, but instead contains only Missouri state-law claims of negligence, civil conspiracy, and strict liability.

The defendants, for their part, have argued that the complaint presents a federal question on its face under the federal common law of foreign relations because the lawsuit implicates the vital economic and sovereign interests of Peru.

Judge Perry disagreed, noting that the acts and damages are all alleged to have taken place by the defendants at a time when the defendants -- not an entity of the Peruvian government -- owned and controlled the mine.

"The questions presented by the case are whether American defendants made decisions or took actions in the United States that caused the plaintiffs' damages," the judge said. "Plaintiffs do not allege that Peru participated in these activities or that defendants acted under color of state law."

Moreover, Judge Perry said, the plaintiffs do not seek to impose liability on the Republic of Peru or on any company owned by Peru.

"While defendants may contend that Peru was involved in the activities or that Peru shares the liability for the plaintiffs' injuries, these arguments constitute defenses, and under the well-pleaded complaint rule, those defenses cannot form the basis for federal subject matter jurisdiction," she said.

Perry remanded the case to the Circuit Court of the City of St. Louis, where she said the defendants' motion to dismiss should be considered. That bid, filed in December, seeks dismissal on the basis of international comity, arguing that the plaintiffs' claims directly implicate the Republic of Peru's ongoing responsibilities with respect to the mine and challenge the adequacy of the environmental regulatory regime adopted by Peru.

Separately last September, Doe Run Peru, which is not a named defendant in the children's suit, appealed a fine levied on it by regulators for allegedly surpassing emissions standards at the La Oroya plant. At the time, the company downplayed the issues covered by the fine as minor and said it had already taken the appropriate corrective measures.

Jose Mogrovejo, Doe Run Peru's vice president for environmental affairs, said in a statement at the time that the infractions were not of a magnitude that could harm the environment, noting that the company's concern was that "people could infer from reading the resolution that it says we have damaged the environment, and that is not the case."

As of September, Doe Run had agreed to spend more than $244 million on environmental improvements in La Oroya.

The plaintiffs are represented in the case by Schlichter Bogard & Denton. Doe Run is represented by Lewis & Rice. DR Acquisition Corp. is represented by McKee Nelson LLP.

The case is A.A.Z.A. et al. v. Doe Run Resources Corp. et al., case number 4:07cv1874, in the U.S. District Court for the Eastern District of Missouri.