Class Action against Inco has all eyes watching

In what is being described as a precedent-setting decision, the Ontario Court of Appeal has certified a class-action lawsuit against nickel miner and producer Inco (N-T, N-N) worth an estimated $350-$500 million, overruling lower courts which twice prevented the case from moving forward.

The suit alleges damages to property values of the homes of some 8,000 residents living near an Inco refinery in Port Colborne, Ont. Some of the residents live across the street from the refinery, which processed nickel from 1918-1984, emitting thousands of tonnes of nickel oxide into the environment. After a Ministry of Environment (MOE) study showing elevated levels of nickel oxide and other contaminants in soil around the refinery was released in 2000, property values allegedly dropped by as much as 40-50%, compared with neighbouring communities.

There’s a lot of interest in the case, and it’s not just other miners that should be paying attention, says Richard Lindgren, a lawyer with the Canadian Environmental Law Association (CELA) — an organization which was granted intervenor status in the appeal and has been supporting the plaintiffs.

“I think the implications go far beyond just the mining sector,” Lindgren says. “Any industry, whether it’s a waste management company or some other chemical manufacturer — to the extent that their operations might cause off-site impacts to public health, public safety, soil or ground water — that could give rise to potential liability.”

The first environmental class-action suit to be certified by an Ontario court, the case could also have implications for other miners who may be forced to deal with the effects of “legacy” or long-term historical pollution.

“This is addressing emissions that may have occurred literally decades ago,” Lindgren says. “That’s the unique and important aspect of this case — we’re sort of going back in time and trying to figure out whether, and to what extent, Inco should be liable.”

The City of Port Colborne, the Region of Niagara, the area’s public and Catholic school boards, and the Ontario government — all named in the original $750-million lawsuit, launched in 2001 — have settled out of court.

Inco is seeking permission to appeal the decision to the Supreme Court — a process which could take months. If the company is denied a chance to appeal, or the Supreme Court hears its appeal and rejects it, Inco will have to fight it out in court, or settle.

Lead lawyer for the plaintiffs, Eric Gillespie, says part of the reason the suit has now been given the green light after being twice denied by lower courts is that the focus of the lawsuit has narrowed since 2001. The claim originally included damages for the health effects of exposure to nickel and other contaminants (such as copper, cobalt and arsenic), as well as for property devaluation.

“Subsequently, Inco did move forward on the health issues,” Gillespie says.

Inco’s actions played a part in the decision to drop the health claims, he adds, citing two major health studies on the residents of Port Colborne conducted through the community-based risk assessment (CBRA) process, set up by Inco and supervised by the Ministry of Environment (MOE).

Paul Martin, a partner with Fasken Martineau and the director of the class actions group at the law firm’s Toronto office, says dropping the personal injury claims made the case much more “manageable” for the courts to treat as a class proceeding. Instead of having to deal with the sometimes contentious arguments concerning the cause of each individual’s health ailments, focusing on property values spares the courts from, in effect, trying hundreds of individual cases as part of one proceeding, and provides “judicial economy” — one of the tests of a class action.

“(Without the personal injury claims) it’s much easier to understand how you can get to the endgame, how you can resolve that piece of litigation economically,” Martin says.

Gillespie says there haven’t been any studies to directly link health effects to the contaminants in Port Colborne, but two studies have shown elevated levels of illnesses, including certain heart conditions, kidney problems and asthma, in the city’s residents. The CBRA process is currently tackling the question of whether further studies — that would prove or disprove a link between the contaminants and ailments in the community — are warranted.

For its part, Inco has been co-operating with the MOE to deal with some of the effects of decades of contamination in the area.

“We helped set up and continue to support a community-based risk assessment process that was put in place specifically to deal with the legacy issues in the community connected with emissions from the refinery,” says Steve Mitchell, director of corporate affairs for Inco. “That process has included an environmental assessment, a crops assessment, and a human health risk assessment.”

Mitchell says Inco has also cleaned up 24 of the 25 properties in the area surrounding the refinery identified by the MOE as requiring remediation. Each property contained soil levels of nickel oxide over 8,000 parts per million — although all parties agree a safe level of nickel oxide has not yet been conclusively determined. The remaining property has not been cleaned up because the owner refuses to participate, Mitchell says.

While Lindgren concedes that Inco has been working closely with the MOE, he says it’s “debatable” whether the two have handled the situation to the satisfaction of local residents. He notes that the CBRA process does not include any financial compensation for affected landowners or residents.

“That’s a major shortcoming of that whole process and that’s one of the reasons why, if the residents are interested in obtaining monetary compensation, then they had to go the class-action route.”

So just how worried should miners be about this case proceeding?

Fasken Martineau lawyer Martin says there are potential benefits for companies like Inco when suits are brought against them as class actions.

“Clearly, industry players don’t like to see these cases at all,” Martin says. “But if they do see them — if they can (win) — there’s a real advantage of foreclosing other claimants who would have the same claim, who would fall within the class definition.”

Martin says that while the case will undoubtedly encourage other environmental class-action suits, it’s not quite open season on historical polluters — yet.

“It hasn’t included the personal injury claims, so that is, I think, a bit of an ease on the minds of say, mining executives who may be faced with these types of claims,” Martin says.

“But they’re not foreclosed,” he warns. “This is a step along the way for plaintiffs to push open the doors much more broadly to take on these environmental cases.”